Marsh: Transactional risk carriers to seek price hikes amid higher claims activity

By Mia MacGregor

March 20 - (The Insurer) - Rising demand for transactional risk insurance led to lower premiums and enhanced coverage in 2024, according to Marsh, although those favourable market conditions could fade as carriers respond to increasing claims by pushing for price hikes.

Marsh’s Transactional risk insurance 2024: Year in review report noted that despite a challenging M&A environment, demand for transactional risk insurance increased as buyers sought coverage to mitigate risks in complex transactions.

The use of representations and warranties insurance, warranty and indemnity insurance and tax protection expanded across multiple sectors, according to the report.

Marsh noted that the competitive insurance landscape contributed to more favourable terms for clients, with lower premiums and enhanced coverage options in 2024.

However, Marsh cautioned that these favourable conditions could wane as insurers begin to seek price increases to offset rising claims activity.

Additionally, the report highlighted that global M&A activity showed a modest recovery in 2024, with deal volume reaching $3.4 trillion, an 8% increase from 2023’s 10-year low.

While overall deal counts declined 14% globally, North American transaction activity rose 5%, totalling $1.4 trillion and accounting for 45% of worldwide M&A, according to the report.

This marked the strongest year for U.S. dealmaking in three years, based on year-end industry data.

The global M&A market is expected to see “robust growth” in 2025, supported by a favourable financing environment. Marsh noted that central banks may continue lowering interest rates, increasing access to capital.

Additionally, private equity firms are expected to remain highly active, backed by significant undeployed capital.

Marsh anticipates that transactional risk insurance will remain a key tool in M&A transactions, with insurers broadening their underwriting appetite to meet evolving client needs.

The competitive landscape is likely to persist, maintaining favourable and innovative coverage options for buyers, according to the report.

However, Marsh warned that there is potential for the market dynamics to shift if M&A activity accelerates more rapidly than anticipated. The report noted that this could lead to a tightening of underwriting conditions in the latter half of the year.

Despite this possibility, Marsh stated that it expects the transactional risk insurance market to remain favourable for buyers through most of 2025, continuing to support dealmakers navigating an evolving M&A landscape.