BY Richard Summerfield
There has been a notable increase in demand for M&A insurance, according to a new report from Aon.
The report, ‘Insurance for M&A: a coming of age and an exciting future ahead’, notes that following a decline in M&A activity after the 2008 financial crisis, the volume of deals reached pre-recession values in 2015 and has increased ever since. The recent economic environment has been favourable for M&A, as interest rates have remained low, company balance sheets are stronger, and deal activity has risen significantly among private equity firms.
According to the report, 3200 deals were transacted globally using warranty and indemnity (W&I) insurance in 2018. W&I insurance is the largest insurance product by premium volume, however buyers and sellers are also looking to tax insurance, litigation and contingency insurance, and bespoke products that include environmental or cyber policies. The market value for transactional liability solutions reached $2.3bn in 2018, a 35 percent increase from 2014.
“Buyers, sellers, and legal and professional service firms are fully aware of the value of insurance during the transaction process, and this has culminated with improved infrastructure within the insurance market,” said Alistair Lester, chief executive of Aon M&A and Transaction Solutions for EMEA. “Insureds now have access to more sophisticated products, a wider choice of providers, larger coverage limits, lower premiums, and services such as capital advisory and consultancy.”
“For an insurer or an MGA, working out how best to capture the opportunities begins with an understanding of the likely evolution of the marketplace. We have developed forecasts for the growth of the marketplace in Europe, including the products that will dominate, evolutions in coverage and how local markets will operate,” said Rohan Dixon, chief executive and president of Aon Inpoint. “This enables us to help insurers identify where the opportunities are, how to access them and how they can improve their capabilities and offerings to better serve buyers and sellers in the M&A environment.”
Report: Insurance for M&A: a coming of age and an exciting future ahead
