US and Canadian M&A deal quantity hit file highs in late 2020 – Marsh
Marsh’s new report found that merger and acquisition (M&A) volumes in both the US and Canada reached record highs in the second half of 2020 despite a sharp decline in the second quarter during the height of the pandemic.
The broker’s new report, “Transaction Risk in 2020 in the US and Canada” also found that this increase in M&A volume was in line with the growth in transaction risk insurance purchases over the same period. Marsh said his transactional risk insurance practice in the US and Canada managed to complete 584 insurance internships in 2020 – an 11% increase from 2019.
Additionally, Marsh reported that a record 1,041 primary and excess transaction risk policies – mostly agency and warranty coverage (R&W) – had been set in 2020, up 22% from 2019 year over year.
“2020 was a year of ups and downs for low-volume M&A in the second quarter, followed by explosive growth in the fourth quarter,” commented Craig Schioppo, head of transaction risk practice at Marsh US & Canada. “The corresponding expanded use of transaction risk solutions reflects the essential role that they play in business processes.”
Marsh suggested in his report that while the 2020 numbers confirmed that transaction risk insurance will continue to play a vital role in the M&A market, there are still some challenges. These challenges include a steady increase in the frequency and severity of claims, rising prices, and the increase in exclusions related to pandemics.
The report also revealed that after years of decline across the Marsh portfolio, R&W insurance rates rose about 10% over the past year. It was also found that the number of claims reported to insurers by Marsh customers more than doubled in 2020.
“The frequency and severity of R&W claims is expected to continue into 2021 and beyond as the volume of transactions continues to grow,” said Schioppo, who added that Marsh expects rate increases in the short- and medium-term, although the Price pressure could be offset by the arrival of new insurers, said the practice manager.