Transactional risk market in Asia continues to grow says Marsh

The transactional risk market in Asia gained momentum in 2024, with increased deal volumes across all sub-regions, according to Marsh. Its Transactional risk insurance 2024: Year in review notes that there is optimism about a potential recovery for M&A activity in 2025, despite concerns about the sustainability of current low pricing in the transactional risk market. According to the report, competition in Asia’s W&I insurance landscape remained vigorous throughout 2024, with insurers striving to meet client demands for better pricing and policy terms amidst a gradual uptick in M&A activity. It says the tax insurance market in Asia has developed significantly, with insurers willing to underwrite tax risks in jurisdictions that were previously outside their remit which, together with decreasing premium rates and greater awareness, has driven the growth of the product in Asia. Claims volume remained stable, with tax claims accounting for most notifications. Looking ahead, market participants in Asia are generally approaching 2025 with greater optimism compared to the beginning of 2024, with some expecting a substantial recovery in M&A activity, says Marsh. “While the transactional risk market in Asia is well-positioned to support the growing pipeline of 2025 deals, there is a reasonable prospect of more difficult insurance market conditions, following several consecutive years of steep declines in pricing, increased frequency and severity of claims against transactional risk policies, and rising business costs. Insurers and industry experts have publicly stated that current transactional risk pricing is unsustainably low and needs to improve in the near term to continue servicing clients in the manner they have come to expect,” the report states. However, Marsh says that regardless of whether or when pricing levels rise, it remains confident that “many of the insured-friendly features of the transactional risk market in Asia will be lasting, as the industry strives to better serve insureds and meet their evolving and increasingly sophisticated needs.” During 2024, W&I premium rates declined further due to excess underwriting capacity and competition. The average premium rate for W&I policies placed by Marsh fell by 24%, from 1.7-1.3%. Primary premium rates for policies without enhancements were as low as 0.6% for Asia operational targets and just under 0.5% for real estate targets. Marsh says there were also fewer disparities in pricing across Asia, with a narrower spread of rates quoted across geographies compared to previous years, when regions like India and Greater China typically saw higher rates than elsewhere. By the end of 2024, average primary premium rates had generally settled in the 1-1.6% range for operational targets and 0.6-0.8% for real estate targets. As for tax liability insurance, the report notes that India’s tax insurance market is the most developed in Asia and is commonly used to cover risks related to international tax treaty benefits, particularly in M&A transactions where the buyer acts as the withholding agent for capital gains tax owed by sellers. The Marsh report says there has also been a notable rise in interest for coverage of domestic tax risks. In 2024, Marsh placed tax insurance programmes in India with aggregate limits reaching approximately $1bn across different policies, reflecting a demand for larger limits of liability and, consequently, greater excess capacity from tax liability insurers. It adds that although India accounts for the majority of tax policies placed in Asia, the use of the product has expanded across the region, notably in China, Indonesia, Japan, South Korea, Singapore and Vietnam.

Transactional risk market in Asia continues to grow says Marsh

Competition sees continued low pricing in W&I insurance in Asia

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