U.S. managing general underwriter predicts big increase in use of transactional insurance in 2013

The global use of transactional insurance, a type of insurance tailored to address issues that arise in a commercial business transaction, could rise by as much as 25% this year, suggests Jeffrey Cowhey, president of United States-based Ambridge Partners LLC.

The firm, a managing general underwriter of transactional, management liability, contingency and specialty management liability insurance products, anticipates a 25% increase in deal submissions in 2013, notes a company statement issued Tuesday. 

Ambridge Partners estimates that transactional insurance – used to address a variety of obstacles that can prohibit deals from completing in areas such as merger and acquisitions, private equity investments and restructurings – is currently taken out on a small percentage of annualized announced deals.

“We believe that as a sector, we write insurance for just 1% of the annualized announced deals,” Cowhey notes. “In comparison, directors and officer’s (D&O) insurance in the U.S. is purchased by 99% of publicly traded companies.”

Ambridge Partners cites research by Experian that indicates, across the U.K., the overall number of mergers, acquisitions, flotations, rights issues and placements announced fell by 3%, from 4,683 transactions in 2011 to 4,543 in 2012.

The decline was led primarily by a reduction in deal-making in Q4 2012, with volumes down by 11% compared to the fourth quarter of 2011. However, “mega deals” worth more than £1 billion announced in 2012 pushed up the total value of deals by 4.8% to £242 billion last year.

That said, Cowhey contends “it is very much a growing sector.”