Viewpoint: How Transactional Risk Insurance Became Essential for M&A Certainty

Mergers and acquisitions (M&A) are rarely simple. Even in buoyant deal environments, uncertainties around valuation, regulatory approval, or contingent liabilities can derail negotiations at the eleventh hour. Over the past decade, transactional risk insurance has moved from being a niche tool to an essential enabler of deal-making across global markets, offering parties the certainty required to close transactions with confidence.

In 2024, Marsh reported placing nearly $68 billion of transactional risk cover across more than 2,700 policies worldwide, a sharp increase from the year prior. This momentum reflects a broader truth: M&A activity today is increasingly underpinned by the availability of insurance solutions that address risk allocation in efficient, commercially pragmatic ways.

Transactional Risk as a Deal Enabler

At the center of this market’s growth is warranty and indemnity (W&I) insurance. Once concentrated in Europe and North America, W&I has now become a fixture in transactions globally, including Asia-Pacific and Latin America. Its core appeal lies in removing friction – buyers gain recourse to a rated insurer rather than to the seller, while sellers achieve a cleaner exit with reduced contingent liability.

The product’s rise has coincided with heightened competition in global M&A, where speed and certainty are prized. Bidders able to offer seller-friendly terms supported by insurance have a competitive advantage, particularly in auction processes. As a result, what was once a specialist instrument is now mainstream, deployed not only in multi-billion-dollar deals but also in mid-market and even smaller transactions.

Cross-Border Activity Drives Uptake

Cross-border activity is one of the clearest factors driving the growth of transactional risk insurance. In regions such as the Nordics, nearly 60% of transactions now involve cross-border buyers and sellers. This naturally introduces additional layers of complexity, from navigating unfamiliar tax regimes to reconciling differences in local legal and regulatory standards. Insurance solutions provide the bridge that allows counterparties from different jurisdictions to transact on a more level playing field, helping to overcome potential stalemates and facilitating smoother deal execution.

Private equity firms also remain at the forefront of demand. Their business model depends on maximizing returns and exiting investments efficiently, often under strict timelines. Insurance products that can protect against unforeseen liabilities or accelerate the release of capital are directly aligned with these objectives. By transferring risk to insurers, private equity houses can focus on delivering performance for their investors, rather than reserving capital against contingent exposures.

Emerging markets are another area of momentum. In Spain, for example, the use of transactional risk insurance has expanded significantly as the local M&A ecosystem has matured. Greater adviser familiarity, combined with more competitive pricing, has made the product accessible to a wider range of deals, including those at the mid-market level. A similar dynamic is unfolding in parts of Latin America and Asia-Pacific, where insurance is increasingly seen as a natural feature of professionalized M&A processes.

Finally, the maturing claims experience is reinforcing confidence across the market. With claims volumes rising, up around 30% in Europe in 2024, the product has been tested under real-world conditions. Insurers are paying valid claims, and this track record is vital for the long-term credibility of the market. For dealmakers, this provides assurance that insurance is not only a negotiating tool but also a reliable safety net if disputes or liabilities crystallize after completion.

Innovation Beyond W&I

Alongside W&I, contingent liability products are expanding the market’s reach. Real estate permitting issues, environmental exposures, and regulatory approvals are increasingly being addressed through insurance. These solutions reflect the market’s growing sophistication and willingness to tackle highly bespoke risks.

The London market in particular has played an outsized role in this innovation, leveraging specialist underwriting expertise to support complex or novel scenarios. This concentration of talent, capital, and advisory infrastructure continues to position London as a global hub for transactional risk.

The Tax Dimension

While W&I remains the most visible product, tax insurance is quietly reshaping the landscape. Traditionally tied to deal-specific risks, tax cover is now moving into a broader strategic role.

Corporates and private equity firms are deploying tax insurance not only in M&A, but also during restructurings, fund wind-ups, and cross-border capital repatriations. For example, HM Revenue & Customs’ more assertive stance on value-added tax (VAT), employment taxes, and international transactions in the United Kingdom has sharpened the demand for protection and certainty.

The product’s utility goes beyond risk transfer: it is increasingly a driver of capital efficiency. Insurance can unlock escrowed funds or provide the assurance needed to release trapped capital, accelerating returns to investors. More recently, underwriters in London have gone further still, offering cover for live audits and even testing solutions tied to potential future changes in law.

These developments underscore how tax insurance, once narrowly perceived, is now part of a wider shift, with transactional risk insurance as an enabler not just of M&A, but of corporate strategy more broadly.

Looking Ahead

As global deal-making continues to evolve, transactional risk insurance is likely to remain a growth market. Its success lies in its adaptability: products designed for one narrow use case have expanded to address a wider spectrum of exposures, across geographies and industries.

For M&A professionals, the message is clear. Insurance is not peripheral to the deal, it is central. And with the ongoing expansion of tax solutions, it is increasingly central not just to deal execution, but to how corporates and private equity firms manage capital, certainty, and governance in an unpredictable world.

Topics Mergers & Acquisitions