This past year was marked by shifting narratives and unexpected outcomes.\u00a0 The early optimism of new vaccines and a promising economic outlook was dampened by new coronavirus variants, supply chain constraints and pressure from inflation.<\/p>\n
Amidst this uncertain economic environment, M&A managed to post an unprecedented level of deal activity.\u00a0 Global M&A volume topped $5 trillion in 2021, a record-setting level sparked by high valuations and low interest rates.\u00a0 About 15% of PE deals last year were done at a valuation multiple of 30x or more, according to Pitchbook<\/a>, the highest share since 2018.<\/p>\n This growth extended to the Representations and Warranties Insurance (RWI) market, where deals using RWI surpassed all previously seen volumes.\u00a0 Globally in 2021, Euclid Transactional bound 1,270 RWI policies, more than twice its previous highwater mark.\u00a0 Deal sizes grew larger, too, with 2021 transactions reaching an average enterprise value of nearly half a billion dollars.\u00a0 Client requests for RWI policies, a good gauge of the total market, neared 9,000, 60% more than in any prior year.<\/p>\n Euclid\u2019s branches outside of the U.S. were a part of 2021\u2019s record breaking pace. Last year we wrote 119 RWI policies in Canada, up from 51 in 2020, and 290 in Europe, the Middle East and Africa (EMEA), versus 126 in the EMEA region a year earlier.<\/p>\n The unparalleled RWI policy volumes of this past year reflect the growing adoption of RWI among clients, deal lawyers and bankers.\u00a0 The RWI market has established itself as an effective tool for managing risk and facilitating fast-paced deal timelines.\u00a0 The elimination of complex indemnification provisions funded by escrows and the reduction of the negotiation of representations and warranties in the acquisition agreement have made deals easier for buyers and sellers.<\/p>\n Deals led by private equity firms continue to account for the vast majority of RWI policies, but interest among strategic buyers is growing as corporations recognize the benefits of the product.\u00a0 And there is plenty of room for corporate adoption to grow.\u00a0 According to PwC<\/a>, more than 60% of M&A deals did not involve a private equity firm.\u00a0 As companies and their advisors gain experience with the underwriting process, we will see more use of RWI in strategic deals.<\/p>\n The product has continued to prove itself as markets demonstrate repeated claims paying ability \u2013 relieving clients from potentially damaging litigation with their business partners. \u00a0Euclid Transactional paid over $100 million in claims in 2021 and grew its claims team to the largest in the industry.\u00a0 Since the firm\u2019s founding, Euclid\u2019s claims team has strived to be a commercial-minded deal partner and has facilitated over $325 million in claims payments to our clients. \u00a0We estimate the market has paid over a billion in claims over the past decade.<\/p>\n Product acceptance and the strong pace of deal activity in the market has led to increased insurance premiums, with global RWI prices rising by approximately 35% compared to 2020.\u00a0 Higher premiums support the expansion of underwriting and claims handling teams to meet elevated demand and we expect this will be necessary to appropriately pay claims that develop in the future. Euclid Transactional added 54 people to our global team last year and have grown to over 110 team members during this period of market wide expansion.<\/p>\n