As Zurich Insurance Group continues its efforts to acquire Beazley, Rowan Bamford, president, Liberty Global Transaction Solutions explains while 2025 was a year for M&A recovery the year ahead is likely to see a tangible uptick.

The global M&A industry started 2025 feeling cautiously optimistic over an anticipated uptick in activity over the course of the year with the risk of political uncertainty and financial instability impacting deals being carried through. After the high volume of deals in 2021, the following years felt quieter than many expected. High interest rates made transactions harder to finance, and private equity investors largely took a step back due to the uncertain nature of the economy. However, as 2025 comes to an end, we see encouraging signs of recovery with a foundation being laid for more sustained activity in the coming year.

Since 2022, high borrowing costs created a headwind for leveraged transactions. Private equity sponsors, who typically drive large M&A activity, found it difficult to structure deals at levels that delivered the returns their investors required. The return profile looked less attractive, and many sponsors simply pressed pause. While deals did not completely stop, they shifted. Most of the transactions in this period were modest bolt-ons and opportunistic strategic buys for value-creation, unlike the larger deals done in 2021. These smaller deals often did not cross the threshold at which private equity buyers typically purchase warranty & indemnity insurance.

2025: a year of recovery

In 2025 this dynamic began to change. Sellers who had waited for a good rate akin to 2021 rates began to reset their expectations. Buyers, having recalibrated their return hurdles, became more willing to transact, especially taking into account high borrowing rates and improved interest rates. We saw a material uptick in deal flow, especially in the larger mid-market. Notably, the number of submissions for transactions valued at US$500 million and above rose sharply, about 300% year-on-year. This suggests that larger private equity players are re-engaging and the momentum will continue in 2026.

The 2025 policy count and premium did not dramatically outperform 2024 due to the pause in Q2 driven by macroeconomic and geopolitical uncertainty. Outside of the US, many deals were simply pushed off, not cancelled as buyers waited to see which direction the market would go as a result of tariffs. Conversely, we saw M&A activity in US increasing, where there was less reliance on imports and exports and concern around supply chain issues.

Elsewhere, activity came back strong in Q3, and if that momentum continues especially through Q4 and into 2026, we believe we will see four quarters of sustained recovery in all the regions. We project an increase of circa 25% on both volume of deals and premium, rather than the fragmented year we have seen in 2025.

Geographic and sectoral drivers

Domestic deal activity in the US remained robust with residual demand from post COVID times leading to the strongest results in terms of premium into the M&A market. Many corporates prioritised US-based targets, partly driven by supply-chain concerns and greater certainty within the domestic market. This self-reliant nature insulated many US transactions from the full force of global uncertainty.

The Asia Pacific market delivered meaningful growth in M&A deal volume coming to the insurance market. Some of this reflects increasing adoption of insurance but it also signals genuine deal-making momentum. The European market is also showing signs of growth with continued recovery expected through 2026, especially as financing conditions improve and sellers become more willing to transact.

On sectors seeing the most M&A growth, technology and software companies remain at the forefront, especially those tied within the AI ecosystem. While this sector holds the most opportunities, it also carries underwriting complexity with these companies still in development phases, sometimes with uncertainty around their operations, customer base and intellectual property.

Additionally, sectors such as healthcare and infrastructure continue to generate demand. There is a flurry of activity in healthcare particularly in the US. Meanwhile, infrastructure remains increasingly attractive with private equity firms being drawn to the predictability of cash flow in a higher rate environment.

Uptick in claims frequency

2025 also saw a substantial increase in claims. As more deals go wrong, more buyers are turning to insurance. However, this squeezes profit margins for the M&A insurance industry unless prices are raised. The industry as a whole has seen a reduction in profit margins with prices dropping over the years of lean M&A activity. With claims activity rising, margins are being squeezed at both ends – on the top and bottom line.

Over the course of 2025, we saw pricing on our US book increase by 15 to 20%, as we recalibrated to higher claims. While similar adjustments are beginning in Europe and Asia, they are playing out more slowly. Historically, US claims cycles lead other regions by months, so we expect further upward movement globally over the next year. It is important for us to be a sustainable partner and not ebb and flow with market conditions. We believe in fair, transparent pricing conversations to allow us to be supporting our clients in the long-term. As deal flow returns, we believe discipline in underwriting and maintaining rigorous standards is vital to deploy capital rapidly.

Looking ahead

As we head into 2026, we expect continued growth in deal volume, both in terms of the number of deals and premium for insured transactions. The larger private equity houses that largely sat out the earlier rate cycle are coming back, bringing in larger, more insurable deals. Our products are integral to ensure that these deals relieve sellers of future liability and that the M&A market is robust. The market is not simply bouncing back to 2021 levels, it is recalibrating, resetting, and refocusing. Driven by an uptick in deal flow, and a recalibrated but resilient capital base, we remain optimistic for the year ahead. The seeds of recovery have sprouted, and we hope to see the industry blossom in the coming years.