Insurance for corporate transactions, known as representation and warranty coverage (R&W), is becoming increasingly common among both buyers and sellers engaged in global mergers and acquisitions. Marsh says demand for R&W insurance has jumped 35% over the past 12 months, even as M&A fell.
"Demand for transactional risk insurance has soared as both buyers and sellers worry about how to protect their positions during a deal," says Lorraine Lloyd-Thomas, senior vice president in the private equity and M&A practice at Marsh. "We are increasingly seeing sellers build transactional risk insurance into the M&A process in order to exit with minimal post-closing warranty exposure, while at the same time preventing buyers from seeking to reduce the purchase price."
Another source of the increased demand, she says, is U.S. corporate buyers and sellers using R&W coverage to counter risks associated with investing in Europe and Asia. U.S. buyers account for 36% of R&W insurance purchased over the past year, with European firms accounting for another 52%.
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