R&W cover demand drives price hikes: CAC Specialty

A sustained period of demand for representations and warranties coverage in mergers and acquisitions that began in late 2020 has driven price increases, according to a report Monday from CAC Specialty, an affiliate of brokerage Cobbs Allen.

Rates softened toward the middle of the year along with a slowdown in M&A but then rebounded later in the year.

“What no one saw coming was the sustained period of unprecedented demand that began toward the end of 2020 – and which largely continued through the first quarter of 2021,” CAC said.

By the end of the year, “rates dramatically increased, driven by historically high demand from a massive M&A rebound, and combined with relatively static supply.”

Rates in first-quarter 2021 have remained higher than a year ago “as M&A charged full steam ahead,” CAC said.

Rates on line — premium divided by limits — quoted for most midmarket transactions have settled back around 3%, with exceptions depending on various factors.