Marsh Releases Annual Report on Transactional Risk Insurance

Marsh recently released its Transactional Risk Insurance 2023: Year in Review report. The report provides insights into the transactional risk insurance landscape throughout 2023 across various regions and forecast trends for 2024.

Transactional risk insurance encompasses policies that address risks associated with M&A transactions, including representations and warranties (R&W) insurance (also known as warranty and indemnity insurance), tax insurance, and other forms of contingent liability coverage.

The key highlights for North America (United States and Canada) are as follows.

• Despite the slowest annual period for US dealmaking in 6 years, Marsh's North America team successfully placed 1,046 transactional risk policies—primary and excess—on 555 unique transactions in 2023, a 4 percent increase over 2022.
• Rates for R&W insurance decreased steadily throughout 2023, a trend that started in February 2022. By December 2023, primary layer R&W insurance rates were more than 50 percent lower than the peak rates seen in early 2022, which is the lowest in more than a decade. Softening rates were impacted by a continued expansion in supply and a weaker demand.
• Not only were most R&W insurance policies in 2023 cheaper, but they also provided better coverage for insureds than at any time in the product's history in North America.
• There was an all-time high demand for tax insurance in the renewable energy sector in 2023 fueled by coverage for investment tax credit projects—predominantly solar energy investments. Marsh's North America tax insurance brokers sent more than 100 tax insurance submissions into the marketplace in 2023.
• Marsh clients in North America reported 240 transactional risk claims in 2023, representing a 30 percent increase in new claims compared to 2022.
• In 2023, R&W insurers paid more than $200 million to Marsh clients, representing over $270 million in recognized losses. The majority of payments—63 percent—resulted from claims asserting financial statements or compliance with law breaches.
• Based on an observed increase in transactional risk insurance submission flow in Q4 2023, 2024 will likely bring an increase in M&A activity.

Craig Schioppo, global head of transactional risk at Marsh Specialty, commented, "In 2023, the global transactional risk insurance remained resilient despite a decline in global M&A activity, with Marsh experiencing its third busiest year on record."

He continued, "Based on increased transactional risk insurance submissions in the fourth quarter of 2023 and current activity to-date, it is likely that 2024 will see an increase in M&A activity globally. Transactional risk insurance will remain crucial, with insurers expanding their underwriting appetite to meet client demand."