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Member, Beacon International Group, Ltd.
Demand for transactional risk insurance increased by 41% last year, according to a report by Marsh Inc.
In a report published Wednesday, Marsh said it placed $4 billion in policy limits around the world for coverage to protect large deals and cross-border acquisitions and sales — a 41% increase over the limits it placed in 2011.
According to the report, “M&A Transactional Risk Solutions: 2012 Global Review,” the most pronounced increase in demand for transactional risk insurance came in North America, where there was a 86% increase in limits placed in 2012. This increase, the report noted, was “largely driven by increased usage of transactional risk insurance on larger deals” — those worth $100 million or more.
“Overseas buyers seeking acquisitions in North America are increasingly cautious about entering the market, given the uncertainties surrounding economic recovery and the enhanced emphasis on regulation,” said Lorraine Lloyd-Thomas, a senior vice president in Marsh’s private equity and mergers and acquisitions practice and head of the U.K. transactional risk team in London, in a statement.
“Conversely, many North American clients are approaching deals in the Europe, Middle East and Africa region with similar trepidation,” she added. “As a result, these corporate buyers are leveraging transactional risk insurance solutions to mitigate risk and provide the comfort required to proceed with their transactions.”
In the report, Marsh noted a trend for sellers in deals including warranty and indemnity coverage into the auction process to enable them a clean exit from the deal.