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Transactional risk cover grows as corporate buyers drive demand

Demand for transactional risk insurance continued to increase across all regions last year, as investors looked to reduce deal risk.

Strategic investors and private equity businesses turned to the cover to close deals in record numbers, according to the Marsh Annual Transactional Risk Report.

Marsh’s merger and acquisition professionals placed 450 transactional risk policies worldwide in the year, up 32% on 2014.

The insurance was originally used almost exclusively by private equity firms, Marsh says, but there has been a “dramatic uplift” in corporate buyers using it to better compete for assets.

The split between private equity and corporate buyers has shifted markedly from 61:39 in 2014 to 56:44 last year. Marsh expects the trend to continue.

In Australia and New Zealand rates for transactional risk insurance continued softening to near-historic lows.

“The local insurance marketplace is flooded with capital, with some insurers willing to commit limits of up to $US100 million ($128 million) on transactions,” Marsh says.