Capital Risks, set up by directors at Lloyd’s broker Protean Risk, has secured an agreement with
CBL Insurance of New Zealand to enable it to underwrite transaction liability insurance.
Set up as a managing general agency (MGA), Capital Risks will have a specific focus on mergers and acquisitions insurance meant to cover small and medium-sized deals, with an offer capacity of up to NZ$17.69 million on any one risk. It will initially offer buyers and sellers warranty and indemnity insurance.
Insurance Business spoke to CBL Corporation managing director,
Peter Harris, who said CBL’s London office has been working with “Capital Risks to put in place this M&A insurance – sometimes called ‘warranty and reps insurance’, which was recently signed off by CBL’s head office.”
He pointed out that it continues CBL’s focus on credit and financial risk, and niche special lines insurance.
“CBL sees an opportunity for the smaller M&A deals, where the major specialist insurers which offer this insurance, prefer not to participate,” he said.
“Capital Risks is an expert, and we are delighted to have signed the deal with it.
“It is intended to be a low-volume flow of good quality deals reflecting our risk appetite. The emphasis will be on quality and in providing insurance capacity to M&A deals which have not been able to get insurance in the past.”
Harris explained that CBL’s intention is to also provide deal flow to Capital Risk from its own UK Professional Fee Protection MGA.
“Our liability manager in UK Angus Ogg has a lot of experience in this area, backed up by our expertise in Australia and New Zealand,” he said.
Harris said that in the future there may be an opportunity to bring the program to CBL’s Australian and New Zealand markets.
“We expect to bind the first deals later in quarter three and quarter four,” he noted.
Harris elaborated that the transaction insurance market has evolved significantly in recent years, with a higher number of M&A deals being insured as capacity increases and premiums become more attractive for purchasers.
In view of this, Capital Risks undertook extensive market research, which identified that this increase in business opportunity has resulted in many focusing on larger transactions, leading to increased minimum premiums and fewer options for small and medium-sized transactions.
Nathan Sewell, CEO of Capital Risks, said, “We have designed our insurance products to fill a void in the market. They offer an opportunity for regional and specialist M&A insurance brokers to develop a new revenue stream. At the same time, it solves an issue that often frustrates stakeholders involved in small to mid-market M&A transactions, such as lawyers and corporate financiers. With our minimum premiums being lower than the market norm, we will be particularly attractive for M&A transactions which require insured limits of GBP2 million (NZ$3.54 million) to GBP10 million (NZ$17.69 million).”
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