Surge in Tax and Litigation Business Insurance as Companies Seek Greater Financial Security

In the current business climate, companies are increasingly seeking additional coverage against potential financial losses, leading to a significant rise in business insurance for tax and litigation. This trend, observed over the past year, is expected to continue as more companies recognize the benefits of such coverage.

The inclusion of tax and litigation insurance in commercial deals, particularly in mergers and acquisitions, has become more prevalent over the last few decades. This shift offers businesses an extra layer of protection, safeguarding them against risks that may not have been previously identified.

Insurers have responded to this growing demand by enhancing their products to provide broader coverage for specific risks like tax and litigation. The market for tax insurance, in particular, has seen a remarkable increase, fueled by a rise in the volume and variety of tax submissions. According to a recent Bloomberg Law report, one metric showed a 30% growth in this market just this year.

This growth in tax insurance is attributed to increased market awareness and the practicality of transferring tax risks from the company’s balance sheet to insurers. As understanding and utilization of this insurance type grow, further increases in demand are anticipated.

Another rapidly growing segment is contingent risk insurance, which comes in two forms. Adverse judgment insurance, common in mergers and acquisitions, protects companies against pending litigation risks. Judgment preservation coverage, on the other hand, shields companies from potential reversals or reductions of legal judgments on appeal, often used in major patent infringement, commercial, or trade secret cases.