Warranty and Indemnity insurance in Asia surges, record policy placements

These policies provided over $7.8b in protection limits.

The transactional risk insurance market in Asia gained momentum in 2024, with Marsh recording increased deal volumes across all sub-regions. 

Activity remained uncertain until September when Warranty and Indemnity (W&I) insurance surged and remained robust through year-end, according to Marsh's Transactional Risk Insurance 2024: Risk in Review.

Marsh reported a record 318 transactional risk policies — both primary and excess — across 148 completed deals, marking a 30% increase in policy placements and a 0.7% rise in completed deals compared to 2023. 

These policies provided over $7.8b in protection limits, covering transactions valued at more than $32.5b.  

Favourable market conditions that began in 2023 persisted throughout 2024, with a 29% year-on-year increase in primary submissions. 

Competition amongst W&I insurers remained strong, leading to lower premium rates, enhanced coverage, and relaxed underwriting requirements. 

The average premium rate for W&I policies dropped by 24%, from 1.7% to 1.3%. 

Primary premium rates for policies without enhancements fell as low as 0.6% for operational targets and just under 0.5% for real estate targets. 

Rates across Asia showed less variation compared to previous years.  

Insurers increasingly offered more favourable retention and de minimis options, including fixed retention thresholds of 0.25% of enterprise value and de minimis thresholds of 0.05% or lower, even for smaller deals. 

Some insurers also offered retention options as low as nil for certain operational targets. Improved W&I insurance terms and conditions included a reduction in policy exclusions, particularly those typically covered by operational insurance, such as cyber risk and product liability. 

Insurers also agreed to remove jurisdiction-specific exclusions, including those related to anti-social forces in Japan and anti-bribery and corruption risks in selected regions.  

Deal sizes also increased, with a notable rise in deals valued between $100m and $250m, now comprising 33% of the portfolio, up from 20% the previous year. Deals valued at $50m or less decreased to 15%, down from 25%. 

Private equity buyers remained the most active users of transactional risk insurance, accounting for 60% of completed deals. Real estate, manufacturing, healthcare, and technology sectors led the transactional risk portfolio.  

Sell-side W&I policies, driven by increased demand in late 2023, made up 6% of total W&I deals completed in 2024. 

These policies helped sellers manage indemnification obligations when buyers insisted on full-recourse deals. 

The uptake of fundamental warranty top-up coverage also grew, particularly in India, with buyers opting to cover up to 100% of the deal value.  

Tax liability insurance demand rose, particularly in India, where Marsh placed programs with aggregate limits of around $1b. 

Claims volume remained stable compared to the previous year, with 20 notifications filed in 2024 across 19 standalone deals. 

Tax claims continued to rise, accounting for 47% of all breach notifications, up 15% from 2023. Financial statement breaches, which were not reported in 2023, made up 27% of claims in 2024.  

Market participants in Asia are approaching 2025 with cautious optimism, expecting a potential recovery in M&A activity. 

Whilst transactional risk pricing remains low, there are concerns about its sustainability amidst rising business costs and an increase in claims.