Arch Insurance Launches Direct Transactional Liability Team Amid Market Changes

In a significant move within the transactional risk insurance landscape, Arch Insurance North America has announced the establishment of a direct transactional liability team. This initiative is specifically focused on representations and warranties (R&W) and tax coverage products, poised to make an impact during a pivotal moment in the market. The decision to launch this team comes as average quoted R&W rates have increased, and the claims record indicates a growing need for direct underwriting rather than reliance on partner-distributed capacities.

The insurance industry has seen a rise in average quoted R&W rates from 2.5% in the fourth quarter of 2024 to 3.23% by the end of 2025, according to Gallagher's transactional risk data. This increase, coupled with a 5% rise in submissions year-over-year, highlights the evolving dynamics of the transactional risk insurance market. As M&A activity continues to surge, the demand for tailored insurance solutions is becoming paramount, making Arch’s entry into direct underwriting particularly timely and relevant.

Understanding the Importance of Direct Underwriting

Direct underwriting refers to the process where insurers manage their risk and claims directly, without intermediaries. This approach is gaining traction in a market characterized by rising rates and substantial claims. The 2026 Global Transactional Risk Insurance Claims Report by Marsh revealed that insurers paid out nearly $650 million to Marsh clients in 2025. Notably, breaches of financial-statement representations accounted for over half of these losses.

In a climate where rates are firming and claims are both significant and well-documented, having a direct underwriting relationship becomes increasingly valuable. It allows M&A participants to engage with insurers that can offer accountability, responsiveness, and a nuanced understanding of transactional complexities. Arch's new model aims to provide precisely this, ensuring that clients can rely on a partner who understands the intricacies of their transactions.

The Role of Arch’s New Team in the Market

Arch Insurance has been involved in the transactional risk market for over 15 years, primarily through managing general agents (MGAs) and managing general underwriters (MGUs) across North America, Bermuda, and the UK. The new direct US platform is not intended to replace this distribution model but rather to complement it. By offering two distinct channels, Arch is well-positioned to cater to different transaction profiles.

The partner channels are designed to efficiently handle volume deal flow, while the direct team is tailored for larger, more complex transactions. This allows Arch to engage with clients where underwriting judgment, speed of response, and claims-handling commitment are critical factors, often outweighing the importance of pricing alone.

Leadership and Strategic Vision

William Carson, who has been appointed as senior vice president of transactional risk, will lead the new team. Carson brings with him valuable experience and relationships from his previous role at Everest Insurance. His understanding of the broker and legal landscapes is essential for the direct model’s success, which relies on swift decision-making and a commitment to client service.

Carson emphasized the importance of being an underwriting partner that can quickly navigate transaction complexities and uphold its commitments when claims arise. The goal is to provide a high-quality experience throughout the transaction lifecycle while maintaining rigorous underwriting discipline.

Market Dynamics and Competitive Landscape

The US transactional liability market is highly competitive, with major players such as AIG, Beazley, Liberty Mutual, Allied World, and Berkshire Hathaway Specialty vying for market share. According to Cooley's M&A group, the current landscape can see over 20 quotes for smaller transactions, a stark contrast to the limited options available during the tighter capacity conditions of 2021.

Despite the competitive intensity, pricing discipline remains a key feature of the market. The firming rates since the end of 2024 suggest that the insurance industry has absorbed claims experiences and is adjusting pricing accordingly. New entrants, including Arch, must differentiate themselves based on service quality and commitment rather than merely on capacity.

The Surge in M&A Activity

The recent surge in US M&A activity further underscores the need for robust transactional risk insurance solutions. According to data from PwC, US M&A deal value reached $1.2 trillion in the first five months of 2026, nearly doubling the $603 billion recorded during the same timeframe in 2025. Interestingly, while overall deal volume has dipped slightly, the projected growth in deal volume for transactions exceeding $100 million is expected to rise by 8% in 2026.

Corporate M&A is projected to grow by 11%, indicating that businesses are increasingly looking to merge or acquire as a strategy for growth. This trend puts pressure on private equity firms, many of which are sitting on close to $1 trillion in dry powder. These firms face mounting expectations from limited partners to deploy capital and generate returns from aging fund vintages.

Private Equity and Its Impact on Transactional Risk Demand

The dynamics within the private equity sector significantly influence the demand for transactional risk insurance. Private equity firms are increasingly using representations and warranties insurance (RWI) as a standard tool for clean exits, allowing sponsors to avoid extended escrow holdbacks that can complicate transactions. Cooley's M&A group notes that carriers are now more willing to underwrite less traditional structures, such as general partner-led secondaries and continuation vehicles—transaction types that are becoming more common as sponsors seek liquidity alternatives to traditional sales.

This shift highlights the evolving landscape of M&A transactions and the importance of having insurance products that can adapt to these changes. With sponsors looking for innovative ways to deploy capital and structure deals, the role of direct underwriting becomes ever more critical in ensuring that the risks are managed effectively.

Key Takeaways

• Arch Insurance has launched a direct transactional liability team focused on representations and warranties and tax coverage products.
• R&W rates have increased, indicating a shift towards direct underwriting relationships.
• The US M&A deal value reached $1.2 trillion in early 2026, highlighting a surge in activity.
• Private equity firms are under pressure to deploy capital, driving demand for innovative insurance solutions.
• Direct underwriting is essential for addressing complex transactions and ensuring claims management.

Frequently Asked Questions

What is representations and warranties insurance (RWI)?

Representations and warranties insurance (RWI) is a specialized insurance product that protects buyers or sellers in mergers and acquisitions from losses arising from breaches of contractual representations and warranties made during the transaction. By providing coverage for such breaches, RWI helps to facilitate smoother transactions by minimizing the financial risk associated with inaccuracies in the information shared between parties. This insurance is particularly useful in preventing disputes and enhancing buyer confidence.

How does direct underwriting differ from traditional insurance models?

Direct underwriting involves insurers managing their risks and claims directly, without the involvement of intermediaries, such as brokers. This model allows insurers to have greater control over the underwriting process, leading to quicker decision-making and more personalized service for clients. In contrast, traditional insurance models often rely on intermediaries to handle transactions, which can result in slower responses and less tailored solutions for complex transactions. Direct underwriting is particularly advantageous in the competitive transactional risk market, where speed and responsiveness are critical.

Why is the increase in M&A activity important for transactional risk insurance?

The increase in M&A activity represents a growing need for transactional risk insurance products, such as RWI. As the volume and complexity of M&A transactions rise, so does the potential for disputes and claims arising from breaches of representations and warranties. Insurance products that address these risks help participants navigate the complexities of M&A deals, enabling smoother transactions and reducing the financial burden of potential claims. The current surge in deal values highlights the importance of having robust insurance solutions in place to manage these risks effectively.

What trends are influencing the private equity market?

The private equity market is currently experiencing significant pressure to deploy capital, as many firms are holding substantial amounts of uninvested capital, often referred to as dry powder. This pressure is driven by limited partners who expect returns on their investments. Additionally, private equity firms are increasingly adopting innovative transaction structures, such as GP-led secondaries and continuation vehicles. These trends are reshaping the demand for transactional risk insurance, as firms seek ways to mitigate risks and ensure successful exits from their investments.