Demand for transactional risk insurance rocketed globally during 2014, with emerging markets in Asia-Pacific playing a vital role

Transactional risk insurance has witnessed an uplift in developed markets such as the US and the Nordics, while awareness of transactional risk insurance products in emerging markets has grown, according to Marsh’s Annual Transactional Risk Report 2014.

The report highlights the emergence of new markets in Asia-Pacific in 2014, notably in Malaysia and the Philippines, and an increase in the number of truly multinational transactions.

In 2014, the first ever policies were placed in Malaysia, Mexico, the Philippines and Saudi Arabia, as investors and sellers in these markets looked to reduce cross-border deal risk.

The US and Canada saw a dramatic increase in the usage of transactional risk insurance in 2014, amid greater acceptance and use by law firms, private equity firms and other deal professionals, especially in the middle market deal space. In the Nordic countries there was an increase of 260% in the number of deals, compared to 2013.

Growth continued at a steady pace in the mature markets across the Europe, Middle East and Africa region, and Marsh reports a rapid adoption of transactional risk insurance in emerging territories.

Overall, the limits of transactional risk insurance placed by Marsh globally in 2014 increased 51% from 2013, rising to US$7.7 billion. The limits placed in Asia-Pacific rose by 5% to US$1.08 billion in 2014.

Karen Beldy Torborg, global leader of Marsh’s Private Equity and M&A Services Practice, says 2014 was a landmark year for the use of transactional risk insurance.

“Record demand in mature M&A markets, which is testament to the efficacy of transactional risk insurance, combined with continued increasing usage in emerging markets, helped drive these historic results,” Torborg says.

“We expect to see similar demand for transactional risk insurance in 2015.”