PriyaPatel
TLDR:
- Despite a dip in M&A activity in 2023, transactional risk insurance remained robust
- R&W insurance rates decreased due to a softening market in 2023
Key Elements:
Transactional risk insurance thrived in 2023 despite a decrease in M&A activity. The report by Marsh revealed that there was a 4% increase in transactional risk policies, insuring risk related to transactions with an aggregate enterprise value exceeding $160 billion.
The market conditions for representations and warranties insurance buyers softened in 2023, leading to a decrease in rates and retentions. Larger transactions also experienced a decline, impacting the R&W marketplace significantly.
Despite the decrease in M&A activity, demand for transactional risk insurance remained consistent across specific sectors. The technology industry accounted for a significant portion of overall deal value, with communications, media, and technology companies leading in transactional risk placements.
The report anticipates an increase in M&A activity in North America in 2024, driven by private equity firms sitting on more “dry powder.” However, the prospects of a contested U.S. presidential election may affect post-Labor Day M&A activity.
Transactional risk insurance is expected to remain a key component of deals in North America regardless of M&A market conditions, as insurers continue to offer better coverage terms and conditions to insureds in a competitive market.
