Insurance-Related Trends, Risks, and Recommendations for Private Equity Transactions: A Conversation with Ryan Seager at Associated (Part 2)

To help businesses, investors, and deal professionals better understand the evolving M&A market, Robert Connolly – a partner in and leader of LP’s Corporate Practice Group – shares a series of conversations with M&A experts.

Below is his conversation with Ryan Seager, private equity practice leader at Associated, a leading privately-held insurance and risk management firm that helps businesses and individuals assess and manage their insurance needs. Ryan is a trusted advisor to private equity sponsors of all kinds, helping them understand the risks associated with their investments and how to navigate then properly.

In this second of a two-part conversation, Ryan discusses current trends and challenges, regulatory changes and shifts, and insurance-related best practices for private equity sponsors. In part one, Ryan talked about Associated’s role in private equity and M&A transactions, the insurance-related risks private equity sponsors should be aware of, and how they help sponsors navigate those challenges.

The responses below have been edited slightly for brevity and clarity.

What are the current market trends and insights?

Rep and warranties insurance (RWI) adoption has surged in the last few years, especially in private equity deals. In 2020-2021, limited carrier bandwidth and high coverage rates were challenges, but carriers have since expanded capacity, making RWI more accessible and competitive.

Standard insurance carriers like CNA, Chubb, Zurich, and the like have established dedicated private equity practices, streamlining the underwriting process to meet the fast-paced nature of PE transactions. This focus has improved underwriting efficiency and made the process more consistent across deals.

We’re also seeing increased buying power in employee benefits and 401(k) programs. For example, United Healthcare’s private equity sector can underwrite multiple portfolio companies, creating cost efficiencies through group pricing. Similarly, master plan 401(k) structures are helping portfolio companies consolidate audits and lower costs.

Are there any emerging risks in the market that private equity firms should be aware of?

Cyber risk remains a top concern, including both direct attacks and dependent business interruption. For example, if a healthcare business relies on a clearinghouse that suffers an outage due to a cyberattack, the disruption can severely impact operations. Ensuring coverage extends to key vendors is critical.

Business interruption tied to supply chain issues is another growing risk. It’s not just about physical damage—if a key supplier fails, the business may face operational downtime. Structuring the business to reduce these exposures is just as important as securing the right insurance coverage.

We advise clients not only on insurance solutions but also on business strategies to mitigate these risks before they escalate.

Are there any regulatory changes or industry shifts to monitor?

How are data, analytics, and AI influencing underwriting?

We’ve made significant investments in data and analytics, with a dedicated team analyzing claims data to identify patterns and risk factors. This allows us to be proactive rather than reactive.

For instance, if we notice a pattern of slip-and-fall claims, we can address footwear requirements with management, reducing future claims. These insights drive meaningful conversations with clients, helping them improve operations beyond just securing coverage.

We’ve also established an AI Committee to explore how AI can enhance underwriting, streamline insurance submissions, and improve internal efficiency. AI is rapidly evolving, and staying aligned with these changes is key to maintaining a competitive edge.

What are some best practices for private equity firms preparing for a transaction?

Do you have any case studies or examples to share?

1. Workers’ Compensation – We identified a client’s experience modification rate was set to increase from 1.0 to 1.5, driving a 50% premium increase. Over a five-to-seven-year hold period, this would have been a significant cost increase. We conducted a full OSHA-style audit, identified contributing factors, and implemented corrective actions to reduce future costs.
2. Environmental Liability – In a manufacturing deal, the buyer was concerned about uncovered environmental liabilities. We proposed comprehensive go-forward coverage and structured a solution to address past liabilities, helping the buyer negotiate seller cost-sharing.
3. ACA Compliance – A portfolio company’s headcount exceeded 100 employees, triggering Affordable Care Act compliance issues. We quantified the potential IRS/DOL exposure and helped the sponsor address it in the purchase agreement, reducing post-close risk.

For more information on Associated, visit their website. For more information on Ryan Seager and Associated’s private equity practice, view the practice group information.

Interested in participating in a future interview series? Please contact Robert Connolly at rconnolly@lplegal.com.

To read other articles in this series, please see here: Insights | LP (lplegal.com)