Mergers and acquisitions insurance buyers have seen exclusions added on policies since the invasion of Ukraine and the imposition of international sanctions on Russia and Belarus, but whether the conflict will affect insurance prices remains unclear.

Pricing, which jumped due to a surge of M&A deals in the fourth quarter of 2021, was up in the first quarter of this year from the year-earlier period but down from the fourth-quarter high, experts said. 

Issues like the war tend to affect coverage rather than price, said Emily Maier, partner and senior vice president, national group leader of M&A insurance, at Woodruff Sawyer & Co., who is based in Austin, Texas.

“The issue is always the precise nature of coverage that is or isn’t provided” under representations and warranties policies, Ms. Maier said.

In the fourth quarter of last year, insurers didn’t have the resources to deal with the increased demand for coverage, said Craig Schioppo, Melville, New York-based global head of transactional risk at Marsh Specialty. 

“Since then, prices have peeled back a bit, by 10% or 20% since December,” Mr. Schioppo said.

If there’s tangential exposure on a deal that makes the risk of loss higher, it may affect pricing or terms, said Jay Rittberg, managing principal at Euclid Transactional LLC in New York.

“Sometimes there are indirect impacts of war that might increase the loss profile of a business, and we might use terms, conditions, retentions and other things,” Mr. Rittberg said.

The conflict has probably added an element of caution to the market, said Rowan Bamford, London-based president of Liberty Global Transaction Solutions, a unit of U.S. insurer Liberty Mutual Insurance Co.

“We’ve seen some capital constraints caused by the rapid growth last year of the class. Certain reinsurers got concerned about over-aggregation and told insurers and MGAs to control their line usage better and write less business,” he said.

A heightened level of claims activity in the last couple of years also lent support to last year’s pricing levels. “Carriers are making sure they’ve got rate adequacy on their book,” he said.

On a global basis, marketwide pricing was up 10% in the first quarter versus the first quarter of 2021, Mr. Bamford said.

In the U.S. market, so far there doesn’t appear to have been much of a pricing impact from the Russia-Ukraine conflict, said Scott Pegram, head of Americas at Liberty Global Transaction Solutions in New York.

“Any changes that we have seen, it would be hard for us as a market to understand if that is related to or impacted by the conflict,” he said.

Meanwhile, deal volume has declined in Europe in the wake of the conflict, but deal and submission flow in the U.S. still appears to be strong, experts said.

William Monat, Chicago-based global head of transactional liability at Mosaic Insurance Holdings Ltd., said U.S. deals are still moving forward and getting done.

“There is more impact on the international cross-border deals. When you look at U.S. domestic deals it depends on whether that business has international touch points, such as on the supply chain, operations, counterparty credit risk,” Mr. Monat said.

There is no material effect on U.S. deals with a fully domestic supply chain, operations and sales, he said. 

Euclid is seeing “minimal impact” so far on how much business it is signing up, Mr. Rittberg said.

“There’s more of an impact on deal closings, but people are still agreeing to buy and sell companies,” he said.

Larry Shapiro, San Francisco-based managing director and representations and warranties insurance team leader at Alliant Insurance Services Inc., said deals involving targets with operations in the region or a connection to the conflict may be on hold.

“We had one buyer that had operations and employees in the region and they slowed the deal down just to evacuate their personnel. But other than that, I haven’t seen a direct impact on deal flow,” he said.

It’s too early to tell whether there will be a significant effect on deal volume, said Randi Mason, co-head of the corporate practice at law firm Morrison Cohen LLP in New York.

“Deal volume is still quite high. It’s not at the same pace that it was in the last quarter of 2021, but the first quarter is never as busy as the fourth quarter,” Ms. Mason said.

Insurers limiting exposures 

Exclusions added to representations and warranties insurance policies will limit insurers’ exposure to the Russia-Ukraine conflict, experts say.

If a target being acquired has exposure to the conflict — a known political exposure — transactional risk insurers will exclude it, said Larry Shapiro, San Francisco-based managing director and representations and warranties insurance team leader at Alliant Insurance Services Inc.

Insurers have responded with either a broad exclusion of any exposure related to Russia, Ukraine or Belarus, or with a more tailored response in which they would still expect to exclude a related exposure but only if it’s applicable, he said.

William Monat, Chicago-based global head of transactional liability at Mosaic Insurance Holdings Ltd., said insurers are concerned about underwriting to the exposure and underwriting to make sure they are not covering any known exposure. 

Jay Rittberg, managing principal at Euclid Transactional LLC in New York, said if there is any Russia-Ukraine exposure at the submissions stage the insurer would “broadly exclude operations, sales or dealings with counterparties in those countries.” 

If there is no connection at the submissions stage, it will continue to evaluate the deal during the diligence process and may exclude then if it sees something, he said.

“We don’t have a blanket exclusion currently because if you’re looking at a company that grows grapes in the Midwest, you probably don’t need an exclusion like this,” Mr. Rittberg said.

The situation is evolving and it’s important for buyers to do their diligence and understand what operations, sales, suppliers and other relationships may exist in Russia, Ukraine and Belarus, said Randi Mason, co-head of the corporate practice at law firm Morrison Cohen LLP in New York.