The Liberty GTS team has been formally capturing data on insurance submissions from brokers for over a decade.  Recently, we’ve been struck by the remarkable increase in submissions for ‘mega-deals’ over the last 5 years.  By ‘mega-deals’ we mean deals with an enterprise value of $1bn or more.  Given the financial significance of these type of deals, we decided to look back into our own data to assess the extent and driving factors for this increase. In 2016, we received 23 submissions for deals with an enterprise value of $1bn or more.  For the calendar year of 2021, that number had grown to 221 submissions, an increase of over 900%. 

What is the reason for such a rise?

As we know, 2021 was a record year for M&A activity across the globe. But much more important than this is the increased market penetration of W&I insurance, combined with the increasing expertise and experience of brokers in placing W&I insurance on these larger transactions.  The W&I insurance market has also grown over the last 5 years in capacity and underwriters. From speaking with brokers and by counting the insurers and MGAs that have followed Liberty GTS’ lead on insuring mega-deals,  we estimate there are now around 30 insurers and MGAs serving the EMEA W&I market. This is a remarkable increase on the 4-5 carriers a decade ago.  We also estimate that there is ca. $900m - $1.2bn of capacity in the EMEA market,  with potentially more capacity being available for certain types of mega-deals (sector and jurisdiction of the Target being key factors), as carriers are prepared to deploy more limit higher up in larger towers of W&I insurance where the risk is lower.  This has meant mega-deals which have required up to a $1bn W&I insurance in EMEA occur on more frequent basis. It also means deals with enterprise values of $10-25$bn can have meaningful W&I insurance obtained and this is in the mind of deal teams for both corporate and private equity users of the product.

Another reason for the increase in deals with enterprise values of $1bn or more seeking W&I insurance, is the increase in the sale of minority stakes in larger companies that seek to raise vital capital to help deal with the impact of Covid-19. In a minority sale context, W&I insurance can be a crucial solution as no executive would want to be involved in suing the corporate partner they have gone into business with.

Why is Liberty GTS involved in so many mega-deals? 

Our clients certainly recognise the value of having Liberty GTS insuring mega-deals because of our financial standing as a large, respected insurer with a globally located team.  They also appreciate our depth of experience.  Of the 221 mega-deals that we saw in the market in 2021, we were involved in underwriting 51 of them, which gives us significant current expertise. Liberty GTS has one of the largest underwriting teams in EMEA and this offers brokers additional comfort that where multiple bidders require individual and clean underwriting teams, Liberty GTS can provide these.

Liberty GTS has successfully demonstrated that it is one of the few trusted insurers who brokers can ask to lead the mega-deals that often involve multiple jurisdictions, with the underwriting needing to be completed on a very tight timeframe. Liberty GTS is part of Liberty Mutual, which is a large-scale global insurer, trusted by institutions, brokers and PE and corporate buyers. This certainly helps us to be invited to provide terms for mega-deals. 

The fact that our M&A claims team is market-leading means brokers and insureds want us to take the lead position on mega-deals.  Brokers and insureds know that if we lead a programme of W&I insurance, we will also lead the response to a claim, and they are reassured by the experience and track record our dedicated claims team has.

With the EMEA W&I market well placed to deal with such mega-deals, our prediction is that the number of these deals seeking W&I insurance in EMEA will remain strong.