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Transactional risk insurance hits record high in 2020: Marsh

16th March 2021 - Author: Matt Sheehan

A new report from Marsh shows that transactional risk insurance purchases reached a record high in the US and Canada over 2020 despite challenges due to the pandemic.

partnerships-and-mergersAfter a dramatic downturn in the second quarter of 2020 due to the coronavirus pandemic, merger and acquisitions (M&A) deal volume soared to record highs in the second half of the year.

This was mirrored by the growth of transactional risk insurance purchases, with Marsh completing 584 insurance placements on mergers and acquisitions in 2020, an 11% increase from 2019.

“2020 was a year of highs and lows for M&A, with low volumes in the second quarter followed by explosive growth in the fourth,” said Craig Schioppo, Marsh’s US & Canada Transactional Risk Practice Leader. “The corresponding expanded use of transactional risk solutions reflects the essential role they play in deal processes.”

According to Marsh, the resilience of transactional risk insurance in 2020 suggests that it will continue to play an integral role in the M&A market going forward.

However, it will have to contend with challenges such as a continued increase in claims frequency and severity, rising prices, and an increase in pandemic-related exclusions, the report notes.

After years of steady decline, R&W insurance rates increased across Marsh’s portfolio by around 10% in 2020, Marsh found.

At the same time, the number of claim notices submitted to insurers from Marsh clients more than doubled in 2020.

“Increases in R&W claims frequency and severity are expected to continue in 2021 and beyond as the volume of transactions continues to grow,” Schioppo continued. “In light of this, we expect rate increases to continue in the short- to medium-term, although the arrival of new insurers to this market could help to offset pricing pressure to some extent.”

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