What we have seen in June renewals
A restored confidence is what is expected to propel M&A activity in 2026. Private equity firms are feeling the weight of exit overhangs from underperforming assets and LPs face liquidity pressures. GPs are expected to focus on exit execution and look to M&A to bolster value on returns, which will drive deal activity. Ample dry powder, sustained LP appetite for private market investments, and value creation opportunities for private companies, present promising PE deal making elements for 2026.
PwC’s Global CEO Survey reassuringly indicates 52% of Australia’s CEOs are planning major acquisitions in the next three years; with 40% planning to drive change via M&A/partnerships. Corporates will look to M&A to facilitate inorganic growth and transformation.
Mid-market M&A is expected to be driven by succession planning (founder led exits), divestiture of non-core assets, availability of debt, organic growth via M&A as well as foreign investment into Australia. The top three sectors for M&A are technology, media & telecommunications, industrials and chemicals, energy, and mining & utilities. This is consistent with the deals Bellrock have seen in the last year.
Deal makers are peering into a cauldron of uncertainty emulsifying geo-political risks, tight financial conditions and oil supply disruption. Inflation is still high and peace in the Middle East seems evasive. Positively, cash rates are currently static at 4.35% after three consecutive rate increases in 2026. Whether it is a hold or hike going forward remains to be seen. However, it seems key drivers for M&A activity will penetrate through.
While the market saw less valuation gaps over the last year, valuation gaps are forecast to stymie negotiations in the year ahead. The prominence of deferred consideration, earn out mechanisms and rollovers should continue.
Premium pricing trends
Soft market conditions with a large pool of insurers and surplus capital have remained, sustaining competition, low premiums and stronger coverage outcomes. Despite a couple of exits in the last year or so, the remaining market participants displayed a healthy appetite for a range of transaction structures, risk profiles and sectors, including AI.
Rates and thresholds
Premium rates (premium as a percentage of the policy limit) have remained low. Minimum premiums that applied to transactions under $10M, ranged between $80,000 and $100,000. Although, price was not the determining factor in selecting a primary insurer. Insurers had more sway based on their coverage views, underwriting approach, W&I claims promise and execution quality. We expect pricing to be impacted by businesses that are distressed, complex, heavily regulated, or under-diligenced. Please reach out to Bellrock for more information on pricing and benchmarking.
0.5% of enterprise value (EV) and 0.25% of EV, fixed and tipping to nil retentions (aggregate claims thresholds) were common across deals and sectors, when supported by quality buy-side diligence and materiality thresholds. We also saw de minimis (per claim threshold) options for lower than 0.05% of EV for additional premiums.
Insurers offered the standard policy period of 3 years (general warranties) and 7 years (tax, title and capacity warranties).
Coverage
Coverage outcomes were strong, with limited deal specific exclusions when supported by diligence that demonstrated the relevant risks were not material. For example, we negotiated removal of transfer pricing and secondary tax liability exclusions where diligence confirmed these were not material risks. Insurers also proved to be collaborative in assessing the appropriate W&I standard of due diligence when it came to employment, leases, material contracts and environmental liability.
On most deals, we saw the general exceptions to sole recourse structures around specific indemnities and seller liability for title and capacity claims in excess of the policy limit. Earn-outs and deferred consideration mechanics were more common than previous years. Deals involving trade buyers contemplated constructive knowledge of the sellers as distinct from actual knowledge, relevant to knowledge qualified warranties. Where insurers are unwilling to cover constructive knowledge, the buyer remains exposed to this gap depending on the recourse structure contemplated under the sale agreement.
Insurer behaviour
Insurers are generally balanced and considered in this class. They remain willing to deploy capacity but are increasingly claims-aware and diligence-dependent. Insurers looked to restore underwriting discipline while remaining collaborative in their underwriting approach. W&I insured deals over the last year have confirmed the benefit of early engagement, robust buy-side DD and discussions with Bellrock and the insurer on DD scope with due regard to the target business’s risk profile. While we expect premiums to remain low, increased claims activity is likely to drive a firming of rates in time.
Claims trends
We expect claims notifications on 17% of policies placed. Bearing in mind that we are within the 18-month window for policies placed since July ’25, this number could increase over the course of the year. Consistent with claims trends, the alleged warranty breaches will likely involve financial statements and accounts warranty breaches. Separately, please refer to our article on the management and progress of W&I claims here.
Legal and regulatory developments
Regulatory complexity brought about by ACCC’s mandatory merger controls, FIRB intervention, and ASIC’s scrutiny of the private credit market add time and costs to deal making. However, dealmakers also harbour positive views towards the added transparency and clarity that the recent regulatory changes bring.
The 2026–27 Federal Budget and the proposed CGT tax changes that apply to all asset classes including shares and units, are expected to impact transaction timing, deal structures and valuation dynamics for both buyers and sellers.
The 50% CGT discount is being replaced by a cost-base indexation method from 1 July 2027 and a 30% minimum tax on net capital gains will apply to trusts and partners in partnerships. PE and VC investments that fall into the shorter hold and higher growth category are exposed to higher taxes as the cost-base indexed by CPI will not see enough growth to minimise the taxable gains. It follows that founder sellers with low-cost bases for shares will see little benefit with this change. It will be interesting to see if these amendments drive and accelerate seller exits before the new changes take effect in July 2027.
AI and technology impact
Digital transformation is expected to be one of the leading drivers of M&A activity. Buyers are increasingly focussed on the impact of generative AI on the target businesses. This is reflected in their buy-side due diligence which includes assessing the risk (augmentation, transformation or revolution), the upside, and response to the disruption. Over the last year we have worked on deals involving SAAS and health-tech businesses augmented by AI. We received strong support from the insurance market in insuring these deals. The valuation methodology for these businesses formed an area of underwriting focus as is commonly the case with technology business.
What deal parties should consider
PE exits
The market indicates that trade has been and will remain, the second most popular exit route after IPOs for PE. ANZ is a buyout dominant market, and most buyout funds are repeat users of W&I. For PE looking to clear exit overhangs through trade, W&I offers a clean exit pathway.
PE sellers typically limit the recourse structure under the sale agreement, where transactional risk insurances provide buyers protection. Known tax and legal liability risks can be taken off the table and transferred to the insurance market. PE sellers and buyers use W&I insurance to protect against unknown risks arising from a breach of seller warranties under the sale agreement. PE firms will benefit from engaging early on the transactional risk workstream and marketing the transaction. Indicative terms on coverage and the underwriting areas of focus inform the seller of (i) potential exclusions, (ii) nature of seller disclosures required to facilitate the expected buy-side due diligence, and (iii) potential specific indemnities. It is helpful to have Bellrock and the insurer’s input on key clauses of the sale agreement to ensure they interact effectively with the policy for a W&I insured deal, this can also inform the deal recourse structure. It is recommended that deal parties/advisors reach out while when the transaction is being contemplated, this can be pre-IM.
Mid-Market M&A
Corporates expressed positive sentiment around dealmaking in the midmarket ($10 million to $250 million). Quality businesses across sectors present opportunities to corporates with healthy balance sheets. These deal makers are looking to increase inorganic growth through M&A investments.
Where these investments are opportunistic, W&I insurance provides that added layer of protection to parties that need to act quickly. This can help take pressure off deal teams as well as investment committees. Access to W&I insurance can support and ease negotiations. Contingent risk insurances (tax and legal liability) can also take known risks off the target’s balance sheet, protecting value of the investment.
W&I insurers have shown strong appetite for mid-market deals with appropriate buy-side DD, particularly where they are prioritising limit management. W&I insurance has become more common in smaller deals ($10M to $15M) with founder sellers looking to limit their post completion liabilities. This is also reflective of soft market conditions where insurers are keener to support smaller deals than before.
Holistic risk review and insurance DD
GPs are looking to focus on improving performance across underperforming mid-tenure assets to prepare them for timely and successful exits. Holistic risk review of the target business to include insurance due diligence can be critical. Insurance costs to ensure adequate insurance on a go-forward basis can have a significant impact on the purchase price. Uninsured claims impact the balance sheet and valuations. Risk review (cyber, people risk, construction, D&O etc.) and sound risk mitigation strategies can help enhance target value. On the flip side, it can help protect buyers and inform negotiations. We have seen under investigated historic insurance claims, unpaid deductibles, surety risks, underinsurance on public liability insurance, incorrect business descriptions in professional indemnity policies, have a material impact on risk exposures. Insurance due diligence identified these risks and helped inform pricing, specific indemnities as well as go forward risk mitigation strategies.
Deal activity over the course of 2025 reflected selective dealmaking and investment in quality opportunities. Reports suggest that this will continue. Amidst geopolitical tensions, Australia is seen as a neutral, stable and secure environment for foreign investors. PE exits, digital transformation (including AI), focus on inorganic (M&A) growth and vertical integration, mid-market M&A and inbound investments might be enough to turn idealism to pragmatism in 2026.
Continue reading our full range of market updates:
- Insurance Market Overview: July 2026
- Claims
- Workplace Risk
- Corporate and Multinational Risk
- Construction, Property and Development
- Financial Lines
