A recent surge in the use of insurance for mergers and acquisition deals has created a greater opportunities and cost savings for stakeholders, while simultaneously changing the way deal professionals distribute and insurers view risk, according to Aon’s global M&A Risk in Review report.
The report states that the increased demand for representations & warranties, tax, litigation, and bespoke contingent insurance has led to an expanded marketplace with the number of insurers jumping from just six in 2014 to 20 in 2018.
Insurers have also expanded the scope of their coverage for higher risk geographies and industries. In turn, more private equity and an increasing number of strategic dealmakers availed themselves of the coverage.
The firm had reportedly placed $27.2 billion in limits globally in 2017, a 34% increase from the previous year.
According to the report this increase has been motivated by declining premium rates; greater insurance capacity; broadening insurer appetite across industries and geographies; and both insurer and dealmakers expanding globally.
“It wasn’t that long ago that insurers stayed away from the health care, tech and intellectual property sectors – now we are able to complete deals upwards of $15 billion,” said Brian Cochrane, global Chief Executive Officer, M&A and Transaction Solutions at Aon.
“We expect this growth trend to continue in 2019 as more complicated risks are addressed and dealmakers work to secure their investments and enhance returns.”
Additionally, the number of tax insurance policies sold to M&A professionals continues to grow, now representing between 35% and 45% of the tax policies that Aon places annually.
Other forms of coverage – including litigation insurance, reverse break fee insurance, contingent liability insurance and intellectual property litigation insurance – are also seeing significant growth as organisations look to manage risk outside of representations and warranties, the report says
