Deal shield

An uptick in cross-borders deals emanating from China has coincided with a surge in M&A insurance activity mainly channelled via Hong Kong, writes James Kelly

With private equity (PE) funds divesting mature assets and cashed-up Chinese conglomerates looking to diversify their portfolios, insurance firms offering risk protection for mergers and acquisitions (M&A) and cross-border transactions will be kept busy in 2016.

While countries in the region are at different levels of maturity, the consensus is that transaction risk insurance is increasingly part of the mix in M&A deals. “Both brokers and insurers have seen a significant increase in both requests for quotations and bound insured deals over the past three years,” says William Seccombe, who leads Jardine Lloyd Thompson’s M&A Transaction Risk Insurance business in Asia.

“Part of the reason for this is following a general global trend, but the investment made by the insurance industry in Asia in terms of people, marketing and training has also led to greater awareness of the products and their application by both clients and their advisers.”

According to Thomson Reuters, China cross-border activity accrued US$161.9 billion in 2015, a 61% increase from the US$100.8 billion accumulated in the previous year. However, despite this level of activity, few mainland China firms offer specialized M&A insurance, leaving it instead to international advisers and insurers based in Hong Kong to advise on and provide transaction risk insurance.