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The use of insurance transactional risk in growth at Aon

by

Hubert Roy

4 December 2018 11:30

Photo : Freepik

Aon has recorded a growth of 96 % of the use of its insurance policy transactional risk around the world from 2014 to 2017.

This increase was of 34 % from 2016 to 2017. By the end of 2018, Aon expects that this growth will be of the order of 40 % to 50 %.

What is the insurance transactional risk ?

This protection is designed to transfer a risk transactional to an insurer. It is therefore intended to protect the buyer or the seller of a business against financial losses arising from the inaccuracy of any representation or warranty set forth in a purchase agreement during a merger or acquisition of a business.

The product is also known under the name of insurance mergers and acquisitions, or insurance of the declarations and guarantees. Names English are also used in the quebec market, whether representation & warranty insurance (rep & warranty), merger & acquisition insurance (M&C insurance) or transactionnal insurance.

Rapid evolution

Brian Cochrane, president, CEO, global segment mergers & acquisitions, solutions, transactions, Aon, even going so far as to say that this coverage has changed the way insurance brokers deal with mergers and acquisitions, but also of the way the insurers see this type of risk. He reports that in 2014, there were only 6 insurers in this market. There are now more than twenty, ” he says.

“Insurers have extended the scope of the coverage, both for the industries that they accept to ensure, but also their geographical positioning. This makes sure to reduce the pricing of premiums, but increase the available capacity for risk-taking “, said Mr. Cochrane.

A growth which will continue

In 207, Aon reports that have covered transactions that had coverage limits totaling $ 27.2 billion (G$). “There is still a little bit of time, it was impossible to cover an acquisition in health care, intellectual property or technology. Now, one can easily find facilities to cover a transaction worth up to$ 15 billion. This growth will continue in 2019, so that we will be able to cover the risks of the transaction more complex, ” says Mr Cochrane.

It is in North America, Aon has taken out the most protection insurance transactional risk, as shown in the following table :

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