Competition intensifies as M&A insurance cover expands

08 August 2017

The mergers and acquisitions market has become softer as competition has intensified. A few years ago there were only five or six insurers offering cover for warranties in a sale agreement. Now there are 13 to 14. 

As a further consequence of this increased market capacity and subsequent competition, there are some significant policy enhancements and extensions of coverage available to clients. 

We are seeing low risk known issues – such as tax and legal liabilities – being covered for no extra cost and limits increasing for the same premium.

A year or two ago it was fairly black and white in terms of what was excluded and what was covered. Now clients can get coverage for things previously never offered and some things that were previously uninsurable.

It is now also possible to include US-style coverage (that has been developed to respond to a more litigious climate) within UK policies, which was never done before. 

This extension of cover married with the continued drop in premium rates has drawn more clients into the market.

Traditionally, only about 5 per cent of corporate transactions used this type of insurance – now that percentage is pushing up towards 20 per cent. 

It is especially attractive to private equity firms, fund wind-ups and liquidators looking for a clean exit from problematic deals.

Tips for buyers

Almost every week something changes in this market so don’t rest on your laurels. Constantly look around for better cover and keener pricing, and expect your broker to do the same on your behalf.

For further information, please contact Felix Sloman, Associate, M&A on felix_sloman@jltgroup.com

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