Marsh reports 108% increase in transactional risk policies placed in U.S., Canada

The number of transactional risk policies placed in United States and Canada more than doubled last year for commercial insurance broker Marsh Ltd., which suggested in a recent report that carriers in North America are expanding their coverage for policies such as representations and warranties.

“Demand for transactional risk insurance, predominantly warranty and indemnity (W&I) or representations and warranties (R&W), but also tax and contingent liability insurance, surged during 2014,” reported New York City-based Marsh in its annual transactional risk report for 2014. “Emerging markets in particular continue to embrace transactional risk insurance, as investors and sellers look to reduce cross-border deal risk.”

Private equity firms “remained the most frequent users of transactional risk insurance, driven by a desire to execute liability-free exits.”

Worldwide, Marsh said it placed 341 transactional risk policies in 2014, up 36% from 251 in 2013. Over the same period, the total limits placed increased 51%, from $5.117 billion in 2013 to $7.72 billion in 2014. All figures are in United States dollars.

In its report, Mash commented on the transactional risk market in various regions.

In the U.S. and Canada, Marsh placed 154 transactional risk policies in 2014, up 108% from 74 placed in 2013.

“The US saw a dramatic increase in R&W insurance in 2014, driven by greater acceptance and use by leading law firms, private equity firms, and other deal professionals, especially for deals involving midsize companies,” Marsh stated. “In addition, more insurers are offering transactional risk insurance, and existing providers expanded their policy coverage by often removing exclusions for consequential, special, and multiplied damages as well as damages based on diminution in value – for additional premium.”

The total limits placed in the U.S. and Canada were $2.732 billion last year, up 103% from $1.344 billion in 2012.

In Europe, the Middle East and Africa, Marsh reported an 18% increase in the number of policies placed, from 125 in 2013 to 148 last year.

“Activity in the Nordic countries was robust, with an increase of 260% in the number of deals compared to 2013,” Marsh said of the EMEA market. “Growth in all countries in the region was spread across a wide range of industries, including energy, healthcare, infrastructure, IT, real estate, food, and retail.”

Marsh added “the first-ever policy in Saudi Arabia was placed during 2014, representing a significant milestone in the Middle East.”