2021 has been one of the biggest years for US mergers and acquisitions (M&A) deal volume on record and certainly in the life of representations and warranties insurance (RWI). We've seen RWI rates nearly double over the course of the year and RWI insurers attempting to restrict coverage in response to increasing claims experience.
RWI is now a staple part of the majority of US M&A deals, and new product developments are enabling it to reach previously uninsurable deals. We're also continuing to see growth in the use of tax, contingent liability and other insurances, which can assist not only M&A, but a broad range of standalone risks generated by transactional situations.
The transactional risks report provides the latest costs, developments and projections for transactional risk products in 2021 and 2022.
Report overview
- Primary RWI rates to remain at 4.0%-6.0% for most sectors with a slight rate decrease in early 2022.
- Rates are likely to stabilize at 3.5%-4.5% for most sectors in late 2022.
- Underwriters are leaning harder on insurance due diligence and underlying group/target programs.
- Integration and sale preparation are expected to increase in 2022 and could contribute to a decrease in deal volumes experienced in 2021.
- There are greater contingent and tax liability insurance inquiries due to integration and sale preparation.
- Fundamental representations insurance increased in 2021 (standalone and excess "top-up").
- Broader deal ranges are insurable due to the development of small business RWI.
