M&A insurance market told to ‘avoid a race to the bottom’: Aon’s Lester

By Rebecca Bole on September 27, 2017

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LONDON – The M&A insurance marketplace has been urged to recognize the economic value of its insurance products and stop fierce price competition.

Alastair Lester, the new CEO of Aon M&A Solutions for EMEA, cited rate decreases of 40 percent in 2017, adding “you don’t need to do this”.

“Transaction insurance is a financial instrument with real value. Don’t under-value our value,” Lester explained, while speaking at Advisen’s Transaction Insurance Insights Conference in London on September 26.

Transaction Insurance (including Warranty & Indemnity or Reps & Warranties policies) is one of the most exciting part of the insurance industry, Lester said. “These solutions are true financial instruments – helping to secure investments and enhance returns. The product has grown up from a spotty adolescent to a maturing millennial. There is still a long way to run for this sector,” Lester told the 100-strong London audience.

The conference addressed the growth of competition in the market as more carriers allocate capital to Transaction Liability underwriting teams, identifying it as a growth area.

Tom Saunders, associate director at Aon Risk Solutions and Felix Sloman, M&A broker at JLT Specialty showed a 60 percent increase in the number of Transaction Liability policies placed globally in 2016. They noted that capacity of $1 billion was available globally, with “several insurers” offering more than $100 million on any one policy. However, competition among carriers had led to an 11 percent decrease in rates from 2015-2016.

They said this additional capacity and subsequent competition was driving specialization among carriers and differentiation of products across different regions.

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Rebecca Bole is EVP & Editor-in-Chief at Advisen. She has nearly 20 years of experience in the international insurance markets, both as an underwriter and a journalist. Contact Rebecca at rbole@advisen.com.