Dealmakers continued with a “frenzy” of transactions over the latter half of 2021 and into 2022, leading to both positives and negatives in the transactional risk market, according to the latest market update from re/insurance broker Lockton.
PwC figures show a 24% increase in deal activity from 2020, and Lockton Transactional Risks team experienced its busiest year on record, placing over 350 policies across Europe.
But whilst dealmaking continues, analysts note that the mounting headwinds of inflation, supply chain and employment issues from lockdowns, the war in Ukraine, spiralling interest rates, commodity and energy issues and potential political instability continue to raise concerns.
Accordingly, dealmaking was fairly concentrated on a few asset classes particularly living and logistics real estate, business services and TMT, Lockton found.
Against this backdrop, new products and innovative use of existing products were stress tested, but capacity restraints from the insurance market, both financially and in manpower, led to difficult coverage and pricing for buyers in Q4 of 2021.
Looking ahead to 2023, Lockton expects to see an ever-greater use of contingent risk and tax policies as buyers push for greater certainty on risks, with tax structures set to be under more scrutiny than ever.
Meanwhile, ESG risks will become an increasingly important issue and buyers will look to the insurance market to provide certainty for non-M&A risks such as regulatory reclassification or judgement preservation on a case, the broker suggests.
Additionally, as claims frequency increases and more claims stories emerge, Lockton expects that clients will become ever more aware of the response from insurers on claims and the role of a broker in claims-handling.
And Lockton also believes that market penetration in emerging markets and across Europe will continue at pace.