Demand for transactional risk insurance surged in 2024 alongside a modest recovery in global mergers and acquisitions (M&A), with limits placed on insured deals rising 38% to $67.8 billion, according to Marsh’s annual global report.
The increase came despite lingering economic uncertainty and rising claims. Marsh, one of the world’s largest insurance brokers, placed over 2,750 transactional risk policies across nearly 1,600 deals with an aggregate enterprise value of over $342 billion. The activity was driven by corporate buyers, who accounted for 55% of policies globally, outpacing private equity for the second consecutive year.
Transactional risk insurance—commonly known as representations and warranties (R&W) insurance in North America and warranty and indemnity (W&I) insurance elsewhere—is used to protect buyers and sellers from breaches in M&A agreements. The product gained further traction in 2024 as dealmakers sought to mitigate legal and tax risks amid heightened regulatory scrutiny.
Pricing declines, capacity expands
Despite rising claims volumes, pricing for primary layer R&W and W&I insurance declined across all regions. Asia saw the sharpest drop at 24%, followed by Europe (21%) and the Pacific (18%). North America, Latin America, and the UK each recorded a 14% decrease in pricing.
Underwriting capacity remained strong globally. In major markets such as North America and Europe, available coverage for single transactions often exceeded $1 billion. New entrants into the underwriting space, particularly in emerging markets like Latin America, further increased competition.
However, Marsh cautioned that price softening may be temporary. Rising claims severity, particularly in North America and the UK, has prompted some insurers to begin adjusting rates. North America saw a 20% rise in claim notifications, while claims in Europe jumped by 45% and in the UK by 70%.
Strategic shifts in buyer behaviour
The shift from private equity to corporate buyers reflects a broader evolution in dealmaking. Corporates are increasingly using insurance to replace traditional indemnities and secure clean exits in acquisitions.
Notably, 59% of North American deals in 2024 featured no seller indemnity—up from 56% in 2023 and significantly above historical levels.
Median transaction sizes also climbed, particularly in the UK (up 50% to $107 million) and North America (up 18% to $125 million), reflecting the return of larger deals and cross-border activity. Deals over $1 billion represented over 7% of North America’s total insured transactions in 2024.
Tax and contingent liability insurance gaining ground
The use of tax insurance—covering exposures such as investment tax credits and restructuring-related liabilities—saw record uptake. In North America, Marsh placed $5.7 billion in tax insurance limits across 298 policies, a 160% increase over the previous year. The renewable energy sector led demand, driven by provisions in the US Inflation Reduction Act.
In Europe, tax insurance saw a 107% increase in total insured limits. Insurers also began underwriting more complex tax exposures and forward-looking risks, including potential future changes in tax law.
Meanwhile, the capacity for contingent liability insurance tightened after large losses in 2024. Reinsurers are scrutinising treaty arrangements more closely, especially for large towers that combine R&W, tax, and contingent risks. Insurers are increasingly capping exposure and hiking prices for excess layers.
Real estate emerges as growth sector
Real estate transactions are emerging as a significant growth area for transactional risk insurance. Historically underpenetrated due to perceived lower risk, the sector saw a rise in placements in 2024, particularly for REIT-related acquisitions and holding company structures.
Insurers offered lower retentions—often as little as 0.1% of enterprise value—and nil-retention options for fundamental warranties. These developments have made insurance more appealing to sellers seeking to avoid escrow structures.
Looking forward, Marsh expects further growth in transactional risk insurance in 2025, underpinned by anticipated increases in global M&A, stable interest rates, and higher insurance penetration among corporate and middle-market buyers.
However, continued claims activity could reshape pricing and underwriting appetite. Marsh warned that if frequency and severity continue to rise, insurers may tighten terms, increase rates, and pull back on lower retention thresholds that have defined the recent buyer-friendly environment.
Even with potential headwinds, transactional risk insurance is expected to remain a core component of M&A structures globally. “Dealmakers are not just insuring larger volumes—they’re embedding insurance into the transaction lifecycle as a strategic enabler,” the report noted.
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