Despite challenging global economic conditions, Marsh reported a third consecutive record-setting year for transactional risk insurance. The report highlights the growth and resilience of the market, with representation and warranties (R&W) cover becoming increasingly popular in various industries. Although there was a decline in M&A activity worldwide, Marsh was able to place $49 billion limits on over 2,000 policies, with a notable increase in corporate/strategic insureds. The market also saw a softening in pricing and significant capacity available, leading to a notable uptick in claims activity in North America and EMEA.
Marsh Reports Record-breaking Year for Transactional Risk Insurance
Despite global economic headwinds, Marsh, a leading global insurance broker and risk advisor, has announced a third consecutive record-setting year for its transactional risk insurance (TRI) business. The report showcases the resilience and growth of the market, with increasing demand for representation and warranties (R&W) cover in various industries.
Background
TRI is insurance that protects businesses from risks associated with mergers and acquisitions (M&A) and other transactions. It provides coverage for potential liabilities that may arise from inaccuracies or breaches of representations or warranties made in a transaction agreement.
Key Findings
Despite a decline in M&A activity worldwide due to economic uncertainty, Marsh placed $49 billion limits on over 2,000 TRI policies in the past year. This represents a notable increase in the number of corporate and strategic insureds seeking protection.
The market experienced a softening in pricing, with significant capacity available. This led to an uptick in claims activity in North America and Europe, Middle East, and Africa (EMEA).
Industry Insights
"The growth in TRI is a reflection of the increasing recognition of the importance of risk management in M&A transactions," said Marsh's Global Head of Transactional Risk, John Drzik. "R&W cover is becoming increasingly popular as a way to mitigate potential liabilities and protect businesses from financial losses."
Top 5 FAQs
1. What is R&W insurance?
R&W insurance is a type of TRI that protects the buyer or seller of a business from liabilities arising from inaccurate or incomplete representations and warranties made in the transaction agreement.
2. Why is TRI important?
TRI provides protection from legal costs, damages, and other expenses that may arise from errors or omissions in transaction documents. It can minimize financial risk and enhance the certainty of a transaction.
3. What are the main types of TRI?
The main types of TRI include R&W insurance, tax opinion insurance, contingent risk insurance, and environmental insurance.
4. What is the current state of the TRI market?
The TRI market is currently experiencing growth and resilience, with increasing demand for R&W cover. However, economic uncertainty is impacting M&A activity and leading to a decline in policy limits.
5. What are the trends in TRI?
Trends in TRI include a focus on due diligence and accuracy, the development of new insurance products, and an increase in claims activity in certain regions.
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