Rising risks are driving companies to purchase more coverage against potential financial losses.
For the last year, business insurance coverage for tax and litigation have been sharply on the rise and experts are predicting that this trend will only continue in the same direction.
As companies increasingly learn of these benefits, they are pushing their coverage to higher levels.
Mergers and acquisitions as well as other commercial deal structures have been transformed by the addition of these forms of business insurance during the last couple of decades. They have provided participants with an additional level of protection – and therefore peace of mind – from risks they may not even have identified.
Insurers have been boosting their products to include broader coverage for specific risks such as tax and litigation. These two products have been growing tremendously over the last few years, but in the last year in particular, due to rising market awareness and use. Next year, experts predict that growth will only continue to rise.
Business insurance has been evolving in recent years as the nature of risks to companies change.
For instance, tax insurance was created to allow companies to transfer the risk of specific tax issues from their balance sheet to the insurer covering them. This market has taken off. Two indicators that have caused this recent growth include the volume and variety of tax submissions. A recent Bloomberg Law report showed that one metric indicated an increase of 30 percent in this market during this year alone.
This product’s success is at least partially connected with broadened market awareness and the effectiveness and practicality of transferring tax risk. As awareness and use continues to risk, volume increases are expected to rise as well.
Contingent risk is the other type of business insurance that has been climbing at a staggering level. It is usually available in two forms. The first is adverse judgment insurance which usually protects companies facing pending litigation to ring-fence litigation exposure, so the insurance takes on the exposure instead. This is most common in mergers and acquisitions.
The second form of this business insurance is judgment preservation coverage, which protects a company from the risk of a reversal, reduction or overturn on appeal of a judgment. This is most often used in large patent infringement, commercial, or trade secret cases.
