Total policy limits for transactional-risk insurance have increased by 35 percent to $2.3 billion in the 12 months preceding June 2012, reports Marsh, showing that businesses are turning to the insurance market for protection from the risks of mergers and acquisitions.
This trend was reported by Marsh Insight's Transactional Risk Update, released Monday, which monitors the need for products that protect deal participants from due-diligence risks and negotiations that may prevent a transaction from closing.
“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, a senior vice president in Marsh's Private Equity and Mergers & Acquisitions (PEMA) Practice. “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.”
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