22 October 2018 Insurance

Insurers offering M&A insurance more than triple

The growth in the use of insurance for mergers and acquisitions (M&A) has created greater opportunity and cost-savings for all stakeholders. According to Aon’s M&A and Transaction Solutions: Risk in Review report released ahead of Baden-Baden, M&A insurance has changed the way deal professionals distribute risk and how insurers view the risk.

The increased demand for representations and warranties (R&W), tax, litigation and bespoke contingent insurance has led to an expanded marketplace, with the number of insurers jumping from just six in 2014 to 20 in 2018. Insurers have also expanded the scope of their coverage for higher risk geographies and industries. In turn, more private equity and an increasing number of strategic dealmakers availed themselves of the coverage.

Aon’s Risk in Review report revealed that the firm placed $27.2 billion in limits globally in 2017. The number of deals increased 34 percent from 2016 to 2017. The notable increase has been motivated by four trends: declining premium rates; greater insurance capacity; broadening insurer appetite across industries and geographies; and insurers and dealmakers expanding globally.

“It wasn’t that long ago that insurers stayed away from the healthcare, tech and intellectual property sectors—now we are able to complete deals of upwards of $15 billion,” said Brian Cochrane, global CEO, M&A and Transaction Solutions at Aon.

“We expect this growth trend to continue in 2019 as more complicated risks are addressed and dealmakers work to secure their investments and enhance returns.”

More than 34 percent of the North American M&A market used R&W insurance in 2017, up from 20 percent in 2016.

Additionally, the number of tax insurance policies sold to M&A professionals continues to grow, now representing 35 to 45 percent of the tax policies that Aon places annually.

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