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Euclid Transactional R&W/W&I Insurance June 2024 Update

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The following is a LinkedIn Article written by Jay Rittberg, Managing Principal at Euclid Transactional. 

Euclid Transactional set monthly records in both April and May 2024, binding 103 and 139 representation and warranty/warranty and indemnity insurance (RWI) policies globally.  The volume of RWI policies bound in May – 139 – was 40% more than any prior May and the second highest number of policies bound in any month ever, second only to the 157 we bound in December 2021.  April and May were also record months for submissions globally, with 752 and 839, respectively, and we received the fifth most submissions ever in May.  Based on our data, we are optimistic that the M&A markets will continue to remain highly active as we approach Q3.

In addition to a rise in volume, deal sizes also rose in both April and May, with average enterprise values reaching over $403 million in May, the second highest level of any May in Euclid Transactional’s history, second only to the record May of 2021.  This is consistent with data on the return of larger deals discussed in our prior post. These numbers continue to be in line with expectations that inflation will remain steady or drop in 2024 and financing for larger deals is available.

With increasing deal size and volume, we are starting to see the price of policies decrease at a lesser rate as we end Q2. The transactional insurance industry has now paid billions of dollars of claims (with Euclid alone having paid over $800 million in claims), but the aggregate rate on our primary RWI in North America is still near historic lows.  Rate increase seems necessary given some of the trends identified in our Global RWI Claims Study released in Q4 2023, and that it will continue to require significant underwriting and claims-handling resources to properly support the high level of service that Euclid hopes to deliver to its partners in the M&A ecosystem.  With expected increased M&A activity, we are hopeful for a rise in rates in 2024 to support increasing claims payments across the industry.

How is your Q2 finish looking? Do our numbers align with your experiences in the M&A and RWI markets? What are your deal expectations for the remainder of 2024?  Feel free reach out to Euclid Transactional to discuss these or any other topics.