Allianz Group is launching a new transactional liability unit designed to take advantage of greater M&A deal activity in the U.S. and, ultimately, around the world.
The insurer’s Allianz Global Corporate & Specialty division will handle the roll-out, with an initial launch in North America. Over time, plans call for offering the transactional liability program in Asia and Europe.
AGCS said it will align with Euclid Transactional as its managing general agent for this initiative, in partnership with several other carriers. Euclid employs M&A deal experts, and specializes in the underwriting of representations & warranties, tax liability, contingent liability and other transaction insurances coverages.
Euclid Insurance Services formed its transactional underwriting platform Euclid Transactional, LLC in April, when Jay Rittberg, a former senior vice president in the M&A unit of American International Group, joined as equity partner and managing principal.
Plans call for the new unit to offer financial protection that protects against inaccuracies made about targets companies or businesses in relation to M&A activity or divestitures.
Allianz is jumping into the transactional risk insurance space as demand for the product has surged.
In April, Marsh determined that M&A deals spurred a double-digit growth in use of the coverage, as acquirer and soon-to-be-acquired companies looked for ways to both limit risk and improve deal terms.
According to Marsh, mergers and acquisitions professionals placed 450 transactional risk policies in 2015. That’s a 32 percent jump over the previous year, according to the firm’s Annual Transactional Risk Report. In a related trend, Marsh noted that limits placed landed at $11.2 billion, 45 percent higher than the previous year, due to larger deal sizes and more insurance limits placed per transaction.
QBE North America is among other insurers who have expanded into the transactional liability space in recent years. In 2015, it launched a new transactional liability practice with an initial focus on Representations & Warranties Insurance and Tax Liability Insurance. Coverage targets financial loss protection stemming from potential legal issues involving an M&A transaction, and QBE North America said it planned to develop tailored coverage over time addressing M&A-related risks for both buyers and sellers involved in M&A deals.
Allianz cited Bloomberg statistics noting that,investors spent a record $3.8 trillion on mergers and acquisitions in 2015. M&A should still be robust in 2016, Allianz said, despite current market volatility.