M&A insurers anticipate rebound in deals activity – Gallagher’s Russell

Mergers and acquisitions (M&A) volume has fluctuated in recent years but a rise in dealmaking could be coming back in 2025, according to a senior broker at Gallagher.

M&A levels have declined since a boom in 2021-2022, leading to less demand among would-be acquirors for protection, and increased competition among insurers.

“It’s been driving pricing down quite considerably, expanding coverage, and insurers are going into emerging territories,” says Charles Russell, head of transactional risks at Gallagher Specialty.

“Into 2025, we are now expecting a better year for M&A volumes, and we’re not expecting rates to continue to creep downwards anymore,” he says.

Better rates for the insurers are to be had within these emerging markets, he notes.

However, some political and economic factors in the US and UK markets suggest a rebound in corporate deal-making, Russell thinks.

For the US – the source of the majority of M&A insurance volume – the election of President Donald Trump in November is the source of this optimism.

Meanwhile in the UK, the recent budget from the newly elected Labour Government steered away from a major rise in capital gains tax.

“I think the main point is that there’s the expectation of less red tape with Trump’s administration. He wants to kind of get M&A deals done, whereas, during the previous Biden administration, it was more difficult to get things through,” says Russell.

Warranty & indemnity insurance (W&I) – otherwise known as reps and warranties – has the core of the transactional risks market for the past two decades, and the source of most income, he emphasises.

“That’s what teams are based around, everything else is an offshoot,” Russell says.

Its rise has been remarkable, he suggests, beginning from just a few sectors a decade ago.

“It’s gone from an embryonic product to touching every site, every sector, every jurisdiction,” he says.

Biggest growth line

W&I’s growth has spurred M&A minded underwriters to cross-sell into tax protections.

“The key line that’s grown the most over the last couple of years is tax insurance,” he continues.

“W&I has been primarily for the ‘unknown unknowns’, but they are starting to delve into the known risks as well, primarily tax risks,” he adds.

To this end, tax accounting expertise, particularly from large law firms, has been brought in to sit within W&I underwriting teams in the past five years, he observes, offering added and enhanced coverages.

“I think the key point here is a couple of years ago, in developed countries like the US and UK, all taxes were insurable, but now the tax underwriters have connections with counsel in emerging territories to help them underwrite specific tax risks,” he said.

Well placed broker

Russell thinks brokers are well placed in the current environment.

“As a broker, we are in a good space now, because there’s a lot of competition from the market – they really want to kind of demonstrate their capabilities,” says Russell.

“Some insurers even want to demonstrate their ability to pay claims, because there aren’t that many of them out there,” he says.

“There’s an array of options to pick from around company markets and MGAs, so And it’s really important that clients ask as many questions as they can of their broker to determine their experience,” he adds.

Things could change, he suggests.

“There might be a boom again, or there might be hard market, within which options could be more limited in future,” he says.

“However, for M&A insurance it might never be the case that there’s a true hard market, because it isn’t a renewals market, it’s transactional, and every deal is separate,” Russell adds.

For a run-down of Gallagher’s latest M&A report, click here.