Resiliency Insurance and risk management will no longer mean checking a box. With deal volume remaining sluggish over the past several years, more carriers are bidding on fewer deals, driving down the cost of R&W coverage even further than the historic lows that it’s been at for the past two years.8 In fact, some deals have resulted in coverage costing less than 2% of deal value. D&O coverage is also approaching all-time lows. As the cost of coverage has dropped, the amount of time to consummate deals has extended. Because PE managers cannot afford to miss earnings projections because of a deal gone bad, the time spent on More portfolio companies will use analytics to assess due diligence has increased as much as 50%. Deals tend to the quality and suitability of coverages, especially for be bigger, more complicated and more prone to mistakes. cybersecurity, business continuity, weather-related risks and catastrophes. All of the above risks have increased Proper due diligence involves both property-casualty across all businesses. insurance and employee benefits issues. Among many elements of diligence, buyers must analyze target PE firms are also facing increased regulatory and company contractual obligations, international exposures, legislative scrutiny: The U.S. Department of Justice, the large claims, the overall adequacy of the benefits program SEC and the European Union have issued new directives and benefits compliance issues before the deal is finalized. and mandated disclosures in the past year that will directly 10 Firms must double or indirectly affect PE operations. Dealmakers and portfolio company managers have often their attention in meeting regulations and managing such considered proper insurance and risk management as a risk throughout 2025. “check the box” exercise needed to complete a deal, with risk management strategies limited to finding the cheapest insurance. 8. Woodruff Sawyer, “Reps & Warranties Insurance: Our 2024 Guide,” August 20, 2024. Exit timelines have extended, however, with some 9. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level investment pools lasting years after their target executives on the issues facing them on profitability, employee dissolution. As a result, risk management and insurance vitality and organizational resilience. programs have become far more important for PE 10. BCG, “The Regulatory Climate Is Getting Hotter for Private Equity,” July 17, 2024. firms’ portcos. Yet fully one-third of financial institutions responding to HUB International's Outlook Executive 9 Survey reported they do not have a formal enterprise risk management assessment process. This could lead to suboptimal risk management, inadequate insurance and — ultimately — inferior results. 55