Marsh has released its “Transactional risk insurance 2023: year in review” report, revealing the broking giant’s third busiest year on record despite a continuing decline in global M&A (mergers and acquisitions) activity due to macroeconomic and geopolitical headwinds.
According to Marsh, the tough conditions notwithstanding, there was resilient demand for transactional risk insurance, emphasizing its crucial role in facilitating M&A deals. Representations and warranties (R&W) cover, along with tax and contingent liability insurance, became a staple across various industry sectors in 2023.
Marsh’s analysis delved into the intricacies of the transactional risk insurance market over the year, spanning continents. The report disclosed that Marsh had a landmark year, its third busiest, by placing $49 billion limits on at least 2,000 policies across nearly 1,200 unique deals, cumulatively valued at more than $337 billion.
The year saw a reduction in M&A transactions worldwide, which, when paired with a surplus of insurance capacity, led to a softening of the market characterized by significant drops in pricing for primary layer R&W insurance. Declines were recorded at 26% in North America, 32% in EMEA (Europe, the Middle East, and Africa), 25% in Asia, and a stark 40% in the Pacific.
In terms of transaction sizes, there was a general downtrend, with North America, EMEA, and Asia witnessing decreases of 16%, 22%, and 51%, respectively, in median figures. Contrarily, the Pacific region saw an upturn in median transaction size, albeit from a smaller number of transactions than its counterparts.
A notable shift in 2023 was Marsh’s client base composition, with corporate/strategic insureds making up 51% of the transactions, surpassing private equity firms for the first time in over a decade.
Insurance underwriting capacity, meanwhile, remained strong worldwide, with single transactions typically seeing over $1 billion in limits available in North America and Europe. Additionally, there was expansion in Asia and the Pacific, thanks to new entrants boosting capacity.
Claims-wise, the year saw a significant uptick in North America and EMEA, with increases of 30% and 65%, respectively. Transactional risk insurance claims activity in Asia stayed consistent with the previous year, while the Pacific experienced a slight decline.
Marsh also observed a marked increase in the adoption of tax insurance among its clients, attributed to a deeper understanding of the product and a more sophisticated approach by underwriters, especially for managing non-M&A related risks such as those associated with balance sheets.
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