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Transactional risk insurance surges: Marsh M&A report

Posted On: Jul. 11, 2019 10:51 AM CST


Private equity and strategic investors took up transactional risk insurance at a record level in 2018, as the number of insured transactions outpaced global mergers and acquisitions activity, Marsh LLC said in a report Thursday.

Transactional risk insurance limits placed globally grew by 35% and the number of insured deals was up 31% in 2018, Marsh said in the report, while average deal size increased to $262.2 million from $224.8 million in 2017.

The value of global M&A activity increased 11.5% to almost $3.5 trillion in 2018, marking the fifth consecutive year with deal volumes in excess of $3 trillion and the largest value since 2015, Marsh said.

“Capital availability remained strong in 2018, augmented by uninvested funds from PE firms, responsive credit markets, and strategic acquirers with robust balance sheets all actively competing for assets,” Marsh said in the report.

In North America, price reductions, larger transactions and more corporate/strategic buyers triggered an increase in limits purchased and number of deals closed, Marsh said.

Total transactional risk insurance limits placed by Marsh in the U.S. and Canada grew 53% in 2018, while the number of transactions closed increased by 40%, the report said.

“This level of growth far outpaced overall M&A activity in the region, which grew by 13.8%, and was valued at $1.6 trillion,” Marsh said in the report.

The number of deals with a corporate/strategic insured increased 21% in 2018, but private equity firms still represented a slight majority of the transactions placed, Marsh said.

Overall capacity continued to expand in 2018, Marsh said, with more than 25 insurers currently offering primary terms for coverage, allowing for placements greater than $1 billion for a single transaction.

“Insurer competition and increased capacity is likely to result in a favorable rate environment for insureds in 2019 and beyond,” Marsh said.