Transactional risk market outlook
and trends – 2025

2. Transactional risk market outlook and trends – 2025

Global M&A activity has continued to grow through 2025, building on momentum from last year. Deal volumes over $100m remain significantly higher than pre-2023 levels, with a notable rise in large ($1bn+) transactions. Political factors remain a dominant driver of risk appetite, while capital market volatility and shifting regulation in the US and EU continue to shape deal terms. The influx of new insurers has expanded capacity, but there are clear signs the “softest” market conditions have now passed.

Politics continued to cast an unabated shadow on deal teams making for an increasingly interesting time for transactional risk management as buyers and sellers alike sought cover for eventualities and exposures driven by political as opposed to economic realities. Global interest rates began to decline towards the end of 2024, however capital market volatility was a continued feature of the landscape. We expect these fundamentals to exert continued influence on the transactional risk landscape, notwithstanding its early indications of recovery.

While constrained policy rates remained a feature across regions, this has not prevented a cohort of new insurers and underwriters from entering transactional risk markets across regions, adding both risk capital capacity and diversification as well as expertise across the piste. From the perspective of an insured, the increasingly competitive environment makes for broad coverage availability and a continued inclination to cede to client requirements.

At the same time there is a sense that the “soft market” may have now passed its “most insured friendly” offering as claims cycles begin to focus insurer minds on risk appetite, sector and jurisdiction presence and balance sheet exposure.

The shifting regulatory environments in the US and the EU will undoubtedly impact target and buyer microeconomics; be it the ability to secure leverage to how (and if) parties can settle on transaction commercials. While transactional risk insurance markets make their money by shouldering some of these risks, they are also subject to the same market forces as their clients. As such, it would come as no surprise if we were to see insurers exercise heightened caution in reaction to a volatile risk landscape from a strategic perspective.

When this is combined with the historically low premiums and broad coverage positions often offered across the board at non-binding indication stage (neither at the expense of successful claims), transactional risk insurance is a cost-effective tool in offsetting unknown risks on a transaction. Though this does beg the question of “how do insureds distinguish between insurers?” as in the absence of a “boom” period, contracting parties look for marginal gains. The start of H2 2025 has seen a significant influx of transactions seeking insurance with many insurers working at full capacity. Such conditions in 2021 led to the end of the previous “soft market” cycle.

With premium rates at an “all-time low” and contemplated coverage at non-binding indication stage often already fulsome, insureds should look to their broker and explore with them the downstream impact of the key metrics which are often overlooked; namely underwriting experience and claims processes. After all, it may be more beneficial and indeed cost effective for the insured party to pay a slightly larger premium for a smoother underwriting process or forego a “nice to have” aspect of cover, for a pragmatic insurer who demonstrates efficiencies in underwriting and exercises a commercial approach when dealing with claims.

That said, this does not mean their position is quite as opaque as it might first seem. Underwriters are continuously innovating and engaging with detail in order to try and find a way to provide cover. After all, insurers want to insure risks. Whether it be boxing of warranties, endorsing policies following additional, post-inception diligence being conducted, providing excess cover in respect of underlying operational insurance policies or utilising technology to help derive comfort in respect of certain categories of warranty, insurers are focused on delivering a smooth insurance experience and robust policy.