Steamin’ Hot Markets of 2017: Opportunities With Transactional Risks

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by Amy O'Connor & Andrea Wells

Insurance Journal examined industries experiencing changes, challenges, expansions and growth in the past year and picked the top five market sectors that could offer opportunities for agents and brokers in the property/casualty insurance industry in 2017. Each market is detailed on MyNewMarkets.com.

Transactional Risk Opportunities

The merger and acquisition insurance sector has seen increased demand for coverage while competition in the market has also grown.

Transactional risk insurance includes a class of policies that cover risks related to M&A, including representations and warranties insurance or warranty and indemnity insurance, tax indemnity insurance, and contingent liability insurance.

Demand for transactional risk insurance increased globally in 2015, according to Marsh, which saw a jump in policies written by 32 percent year-on-year. Marsh reported that uptake rates increased in all regions, continuing the trend from recent years.

“A rise in the number of policies placed in Asia over the past year was particularly noteworthy,” wrote Karen Beldy Torborg, global practice leader of Marsh’s Private Equity and M&A Services, in a Marsh report. She added that the number of policies purchased also increased in other regions: up 21 percent in the U.S. and Canada and 15 percent in Europe, the Middle East, and Africa, year-over-year. The US and Canada also experienced a record value of limits placed, rising 56 percent in 2015 compared to 2014.

The growth in transactional risk products is an area that came as a surprise to Patrick Ryan, chairman & CEO of Ryan Specialty Group.

“Transactional insurance is reps and warranties from M&A transactions, litigation, insuring litigation risks, tax. Those three product lines, risks, are just growing exponentially,” he told Insurance Journal in September 2016.

The number of markets offering M&A insurance has grown, too. More than 25 insurers now offer products under the banner of “transactional risk solutions.” The increase has been driven by demand as well as by insurers seeking new sources of written premium, according to Marsh’s Annual Transactional Risk Report published in April 2016.

It’s a good market for AIG and an area the property/casualty insurer says it will continue to invest in, Michael Turnbull, America’s M&A manager at AIG, told Insurance Journal.

AIG submissions for M&A business rose 23 percent from 2015-2016. As a result, Turnbull said the AIG M&A team has grown in response to the increased demand. “We have put underwriters onto the west coast in San Francisco and also in Chicago, Boston and Toronto,” he said.

Turnbull said while competition in the sector has increased, AIG continues to see significant opportunities in the M&A space in areas where buyers had not traditionally purchased coverage. “This product plays well in the mid-market … from $25 million deals to a couple of billion,” he said. Turnbull said for AIG, most of the growth has been in deals ranging from $50 million to $1 billion and primarily in the U.S. but he also noted growth in various cross border deals. “We see good quality transactions happening where insurance hasn’t been contemplated yet so our view is that there is definitely a good deal of room to play still left in this market,” Turnbull added.

Other M&A activity reported in 2016:

  • ANV Global Services Ltd, the international managing general underwriter (MGU) of global specialty insurance group ANV, increased its Lloyd’s underwriting capacity for mergers and acquisitions insurance to a limit of €40 million, $40 million and £30 million per risk, marking an increase of 10 million in each currency compared with previous limits. Five supporting carriers provide “A” rated Lloyd’s capacity to ANV Global Services M&A Insurance, with ANV Syndicate 1861 continuing to provide the majority share of capacity. ANV’s Barcelona and London-based M&A team focuses primarily on bespoke warranties and indemnities insurance for commercial and financial clients across the European and UK markets. The company’s Lloyd’s syndicate, ANV 1861, continues to provide the majority share of the capacity under the MGU’s Lloyd’s binding authority.
  • Preparing to capitalize on merger and acquisition (M&A) activity in 2017, XL Catlin further built out its global M&A insurance team with the appointments of Joseph W. Laws and Michael J. McGowan as directors of M&A Insurance in North America. McGowan joins XL Catlin from Chubb where he helped build out Chubb’s Transactional Risk practice. Laws spent five years at Kirkland & Ellis, where he advised private equity funds, as well as public and private companies related to mergers, acquisitions, leveraged finance, equity investment, joint venture and other commercial transactions.
  • Ironshore International expanded its global Mergers & Acquisitions unit by opening an office for transactions in the North and Latin American regions. The Americas team is led by Navine K. Aggarwal, senior vice president, head of Mergers & Acquisitions of the Americas, who will be based in New York. Aggarwal previously served as vice president of Mergers & Acquisitions with Allied World Assurance Co. Ironshore also added several regional underwriting specialists to its team. All new appointments came from Allied World, where each served in various positions within the mergers and acquisitions sector of the insurance industry. Patrick Ryan, vice president, and Aartie Manansingh, assistant vice president were named to Ironshore’s New York office while Elizabeth Cunnane, vice president, and Andrew Stewart, vice president, operate the Atlanta and Toronto offices.
  • Breckenridge Insurance Group jumped into the space in 2016 with the formation of Vista Insurance Advisors, a new company focused on the Transactional and Mergers and Acquisitions market. Vista Insurance Advisors is led by Chief Executive Officer Thomas Dowd based in New York who previously worked for AIG, Lloyd’s, Crum & Forster, Employers Insurance of Wausau and Seneca Insurance.

Check back April 3 for more on the growth and evolution of the sharing economy market…


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