The global transactional risk insurance market grew significantly in 2011, continuing a recent trend, as buyers and sellers utilised this unique suite of insurance solutions to mitigate uncertainties prevalent in mergers, acquisitions, divestitures and other corporate transactions. The Transactional Risk team at Marsh, a global leader in this market, placed a record US$2.9 billion in policy limits in 2011, a 43% increase from the previous year.

Asia Pacific was the fastest growing region for transactional risk placements, with a 240% increase from the previous year. The solutions placed were predominantly warranty and indemnity (W&I) insurance for unidentified breaches of warranty followed by tax liability insurance for identified tax risks. Interestingly, the solutions were heavily geared towards buyers as the insured party (rather than sellers) with 79% of the policies being structured in this way globally.

Key trends in 2011

• acting for sellers seeking clean exits;
• acting for US corporates acquiring overseas targets;
• minimising risks in real estate transactions by using W&I insurance or a contingent policy to cover a specific risk;
• removing buyers’ concerns about the strength of a seller’s covenant; and
• acting for buyers where the warranty cap offered by the sellers is minimal or in some jurisdictions where there is no recourse against the sellers.

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