Global W&I market set for continued growth as M&A activity increases

Increased deal activity and insurance capacity is leading to new markets and a renewed appetite for coverage, although this is likely to lead to an uptick in notifications and potentially more ‘difficult’ claims.

Despite the initial expectation at the outset of the pandemic in 2020 that the mergers and acquisitions (M&A) market would suffer from declining deal flow, the M&A market has rebounded together with continued appetite for W&I insurance to support those deals. 

Many of the insurers we work with have reported that the 12 months from mid-2020 were some of their busiest in this sector, with renewed focus not just in more traditional markets, but also other regions, including India, the UAE and Israel. Underwriting in Continental Europe and Singapore in particular has benefitted from strong performance in this period. This growth trend is set to continue in the next 12 months and is likely to result in more insurers entering the market, whether through MGAs or in their own capacity.

Given the changing economic conditions and resultant uncertainties, many insurers have understandably also been taking a firmer position on wordings, being more selective in their choice of risks and looking for better premium returns. 

As more policies are underwritten, of course, notifications are also likely to increase over the coming months and years. In particular, businesses that were acquired during the pandemic, particularly those that may have taken advantage of temporary protections offered by governments and regulators around the world, would seem to be a likely source of such increased notifications over the next 12 months and beyond. Whilst it is to be hoped that buyers will have carried out more focussed due diligence given the prevailing economic conditions, there will inevitably be unexpected or hidden issues that slip through and/or deals that were considered to be “too good to pass up”. 

As a consequence of these particular market conditions, as well as more notifications it seems likely that the next 12 months and beyond will also see a greater number of what might be termed “difficult” claims. Our expectation is that the accounting and contractual warranties are likely to be particularly significant and conversations about the valuation exercise that was carried out at the time of the acquisition, given the impact of the pandemic, are also likely to be challenging.

View all our Insurance 2022 Predictions here