Sale of transactional risk policies soars 50% in 2012 in Asia

Wednesday, 20 March 2013 00:25 - - {{hitsCtrl.values.hits}}

The number of transactional risk insurance policies purchased in Asia surged 50% y-o-y amidst a growing trend of increased awareness and use of these deal risk mitigation tools, says Marsh.

Given the level of queries it received in the first few months of 2013, Marsh expects demand to continue to increase.

Globally, demand for transactional risk insurance grew by 41% last year as companies increasingly turned to insurance to protect large deals and cross-border acquisitions or sales.

“Overseas buyers seeking acquisitions in North America are increasingly cautious about entering the market, given the uncertainties surrounding economic recovery and the enhanced emphasis on regulation,” says Lorraine Lloyd-Thomas, a Senior Vice President in the Private Equity and Mergers & Acquisitions Services Practice at Marsh.

“Conversely, many North American clients are approaching deals in Europe, the Middle East and Africa and Asia Pacific with similar trepidation. As a result, these corporate buyers are leveraging transactional risk insurance solutions to mitigate risk and provide the comfort required to proceed with their transactions.”

Though relatively new in Asia, Warranty & Indemnity (W&I) insurance is quickly taking hold in the region, with the demand being driven by deal lawyers and investment bankers, who are looking for ways to reduce deal risk.

Private equity firms and corporates engaged in M&A activities are also driving the demand, says Marsh.

W&I insurance is most common in the UK, Europe, US and Australia.