Transactional Risk Insurance Becomes Central to M Deal-Making

What's Happening?

Transactional risk insurance has evolved from a niche tool to a crucial component in mergers and acquisitions (M&A), providing certainty and enabling deal-making across global markets. Marsh reported placing nearly $68 billion of transactional risk cover in 2024, highlighting its growing importance. Warranty and indemnity (W&I) insurance, once concentrated in Europe and North America, is now a fixture in transactions worldwide, including Asia-Pacific and Latin America. This insurance allows buyers to gain recourse to a rated insurer rather than the seller, facilitating smoother exits and reducing contingent liabilities. The rise of transactional risk insurance coincides with heightened competition in global M&A, where speed and certainty are highly valued. Cross-border activity, particularly in regions like the Nordics, drives the growth of this insurance, helping navigate complexities such as unfamiliar tax regimes and local legal standards.

Why It's Important?

The significance of transactional risk insurance lies in its ability to provide certainty and facilitate smoother deal execution in the complex world of M&A. It offers a competitive advantage to bidders who can present seller-friendly terms supported by insurance, especially in auction processes. Private equity firms benefit from these products as they align with their objectives of maximizing returns and exiting investments efficiently. The insurance solutions help overcome potential stalemates in cross-border transactions, allowing parties from different jurisdictions to transact on a more level playing field. Additionally, the maturing claims experience reinforces confidence in the market, ensuring that insurance is not only a negotiating tool but also a reliable safety net for dealmakers.

What's Next?

As global deal-making continues to evolve, transactional risk insurance is expected to remain a growth market due to its adaptability. Products initially designed for narrow use cases are expanding to address a wider spectrum of exposures across geographies and industries. The ongoing expansion of tax solutions further integrates insurance into corporate strategy, not just deal execution. This trend suggests that insurance will continue to play a central role in how corporates and private equity firms manage capital, certainty, and governance in an unpredictable world.

Beyond the Headlines

Transactional risk insurance is increasingly seen as a strategic tool beyond traditional M&A applications. Tax insurance, for example, is reshaping the landscape by moving into broader strategic roles, such as during restructurings and cross-border capital repatriations. This shift underscores the insurance market's growing sophistication and willingness to tackle bespoke risks. The London market, with its specialist underwriting expertise, continues to be a global hub for transactional risk innovation, supporting complex scenarios and driving the market's growth.