Research conducted by Marsh’s Private Equity and Mergers & Acquisitions (M&A) Services Practice reports continued use of the solution for deals in mature markets such as the US and the Nordics. Marsh also reports that awareness of transactional risk insurance products in emerging markets continues to grow: in 2014, the first ever policies were placed in Malaysia, Mexico, the Philippines, and Saudi Arabia, as investors and sellers in these emerging markets look to reduce cross-border deal risk.
According to Marsh’s Annual Transactional Risk Report 2014, the limits of transactional risk insurance placed by Marsh globally in 2014 increased 51% from 2013, rising to USD7.7 billion.
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The US and Canada saw a dramatic increase in the usage of transactional risk insurance in 2014, amid greater acceptance and use by law firms, private equity firms and other deal professionals, especially in the middle market deal space. In the US, the market is being driven by private equity sellers seeking a clean exit, along with buyers utilising transactional risk insurance to enhance their bid in auction scenarios. The limits placed in the US rose to USD2.7 billion in 2014, up by 103% from USD1.3 billion in 2013.
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While growth continued at a steady pace in the mature markets across the Europe, Middle East and Africa (EMEA) region, Marsh reports the rapid adoption of transactional risk insurance in emerging territories. In the Nordic countries Marsh reports an increase of 260% in the number of deals, compared to 2013. The first ever transactional risk insurance policy in Saudi Arabia was placed during 2014, representing a significant milestone in the Middle East. Overall, the limits placed in EMEA rose by 42%, from USD2.7 billion in 2013 to USD3.9 billion in 2014.
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Marsh reports the emergence of new markets in Asia-Pacific in 2014, notably in Malaysia and the Philippines, and an increase in the number of truly multinational transactions, as buyers utilise transactional risk insurance more strategically to protect their deals. The limits placed in Asia-Pacific rose to by 5% to USD1.08 billion in 2014.
Karen Beldy Torborg, global leader of Marsh’s Private Equity and M&A Services Practice, commented:
“2014 was a landmark year for the use of this insurance solution. Record demand in mature M&A markets, which is testament to the efficacy of transactional risk insurance, combined with continued increasing usage in emerging markets, helped drive these historic results. We expect to see similar demand for transactional risk insurance in 2015.”
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