2024 a near record year for transactional risk insurance, reports Marsh

Insurance broker and risk advisor Marsh has announced its second-best year on record for transactional risk insurance, having placed $67.8 billion in transactional risk insurance limits, a substantial 38% increase from the previous year.

This growth was driven by a 33% rise in the number of policies placed, totalling over 2,750, and a 31% increase in unique transactions, reaching nearly 1,600.

Collectively, these transactions represented an aggregate enterprise value exceeding $342 billion.

The strong performance reflects a transactional risk insurance market that remained largely favourable for buyers throughout the year.

Notably, pricing for primary layer Representations and Warranties (R&W) and Warranty and Indemnity (W&I) insurance, placed by Marsh, experienced significant declines across all regions.

North America, Latin America, and the United Kingdom were down 14%; Europe, down 21%; while Asia was down 24% and the Pacific was down 18%.

Despite the overall downward trend, North America maintained higher pricing levels compared to other regions, consistent with historical patterns, Marsh noted.

In 2024, median transaction sizes showed mixed results. Latin America saw the largest growth at 200%, with sizes increasing to $300 million. Meanwhile, the United Kingdom and North America experienced more moderate increases of 40% and 18%, with median transaction sizes reaching $107 million and $125 million, respectively.

Europe had a slight increase of 1.3% to $71 million, whereas the Pacific region reported a decrease, with median transaction sizes falling to $58 million.

The average deal size significantly outpaced the median deal size across all regions, driven by a greater volume of large transactions. The global average deal size exceeded US$386 million.

Marsh also highlighted that 2024 was the second consecutive year it closed more transactions on behalf of corporate/strategic insureds (55%) than for private equity firms (45%).

According to the broker, this reflects “a shift in market dynamics as corporate buyers increasingly used transactional risk insurance to facilitate their M&A activities.”

Despite sufficient global underwriting capacity remaining, with approximately $1 billion of limits typically available for single transactions in North America, UK, and Europe, insurers began to manage limit deployment more conservatively toward the end of the year, owing to increased claims activity on large insurance towers, Marsh noted.

The entry of new market participants further bolstered available capacity in Latin America, Asia, and the Pacific, enhancing competition among insurers.

The increase in transactional risk insurance claims was most significant in the UK (70%), followed by Europe (45%) and North America (20%). Asia’s claims activity was unchanged from the previous year, and the Pacific region saw a slight decrease in claims notifications.

Marsh also observed an increase in the use of tax insurance by its clients, particularly those in the renewable energy sector, who are seeking coverage for investment and production tax credits.

This trend is due to both a greater understanding of tax insurance products and increased availability from underwriters.

Looking ahead, Marsh expects the global M&A landscape to experience robust growth in 2025, mainly as a result of the increased interest observed in transactional risk insurance and M&A activity in 2024.

“This activity is expected to be further bolstered by a favourable financing environment, as central banks may continue to lower interest rates, providing greater access to capital,” the broker stated.

Furthermore, due to large amounts of undeployed capital, private equity firms are predicted to maintain their activity.

Marsh stated: “Transactional risk insurance will likely remain a key component of M&A transactions across the globe, with insurers expanding their underwriting appetite to meet clients’ evolving demands. The competitive landscape among insurers is expected to persist, maintaining favourable and innovative coverage options for buyers.

“However, there is potential for the market dynamics to shift if M&A activity accelerates more rapidly than anticipated. This could lead to a tightening of underwriting conditions in the latter half of the year.”

Concluding: “Despite this, we expect that the transactional risk insurance market will provide favourable conditions for buyers throughout most of 2025, remaining a key tool for dealmakers navigating the complexities of M&A transactions.”

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.