The transactional risk insurance sector in Asia saw significant growth in 2024, with a notable surge in Warranty and Indemnity (W&I) insurance policies, marking a record number of policy placements.
According to Marsh’s Transactional Risk Insurance 2024: Risk in Review, the market saw a major increase in deal volumes across all sub-regions, with the upward momentum beginning in September and continuing through to the year’s end. Marsh reported a total of 318 transactional risk policies, both primary and excess, across 148 completed deals. This represents a 30% increase in policy placements and a slight 0.7% rise in completed deals compared to the previous year.
These policies provided over $7.8 billion in protection limits, covering transactions valued at more than $32.5 billion.
Favorable Market Conditions and Increased Competition
The favorable market conditions that began in 2023 persisted throughout 2024, driving a 29% year-on-year increase in primary submissions. Intense competition among W&I insurers contributed to reduced premium rates, expanded coverage, and more flexible underwriting requirements.
The average premium rate for W&I policies dropped significantly by 24%, from 1.7% to 1.3%. For policies without enhancements, primary premium rates fell as low as 0.6% for operational targets and just under 0.5% for real estate transactions. Rates across Asia showed less variation compared to previous years, reflecting a more stable pricing environment.
Improved Policy Terms and Conditions
Insurers offered more attractive terms, including lower retention thresholds and de minimis options. Fixed retention thresholds of 0.25% of enterprise value and de minimis thresholds of 0.05% or lower were made available even for smaller deals. Some insurers even offered retention options as low as nil for certain operational targets.
Additionally, W&I insurance policies saw improved terms, including reductions in policy exclusions, especially those traditionally covered by operational insurance such as cyber risk and product liability. Jurisdiction-specific exclusions were also removed, including those related to anti-social forces in Japan and anti-bribery and corruption risks in certain regions.
Increasing Deal Sizes and Sector Trends
The average deal size also increased in 2024, particularly in the $100 million to $250 million range, which now comprises 33% of the portfolio—up from 20% the previous year. Conversely, deals valued at $50 million or less decreased to 15%, down from 25%.
Private equity buyers remained the dominant users of transactional risk insurance, accounting for 60% of completed deals. The real estate, manufacturing, healthcare, and technology sectors led the transactional risk portfolio, while sell-side W&I policies, which surged in demand during late 2023, represented 6% of the total W&I deals completed in 2024. These policies helped sellers manage indemnification obligations when buyers demanded full-recourse agreements.
Tax Liability Insurance and Claims Activity
The demand for tax liability insurance also increased, particularly in India, where Marsh placed programs with aggregate limits reaching around $1 billion. Meanwhile, claims volume remained steady compared to the previous year, with 20 notifications filed in 2024 across 19 standalone deals. Notably, tax claims continued to rise, now accounting for 47% of all breach notifications, up 15% from 2023. Financial statement breaches, which had not been reported in 2023, made up 27% of claims in 2024.
Outlook for 2025
Looking ahead to 2025, market participants in Asia are approaching the year with cautious optimism, anticipating a potential recovery in M&A activity. While transactional risk pricing remains low, concerns are growing about its sustainability in light of rising business costs and an increase in claims.
The rise in W&I insurance policy placements reflects the continued strength of the transactional risk insurance market in Asia, with favorable conditions supporting growth and increased competition among insurers. However, the market will need to navigate challenges such as rising claims and costs as it enters 2025.
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