Advisen has released a new report on the insurance brokerage market which reveals that the rapid consolidation in the brokerage sector will only be temporarily slowed by the global economic recession.
John Molka III, the author of the report, said: “Large brokers enjoy certain advantages of scope and scale. At least in theory, their costs are lower, and they are able to provide a broader array of services. But small brokers are the engines of growth in the insurance market, and larger brokers will continue to acquire them to tap into their growth potential.”
Due, in part, to pressure from former New York attorney general Eliot Spitzer, the very largest brokers have shifted their acquisition strategy from vertical integration, owning the supply chain to achieve greater breadth and depth across more market segments, focussing on both niche opportunities and the vast middle market.
The middle market has long been the strength of mid-size brokers, many of which have pursued aggressive roll up acquisition strategies to grow market share in this segment.
Advisen’s 20-page report, Insurance Broker Economics: The Carousel of M&As, also takes an in-depth look at the important role of private equity in the broker market, examines the economics of the insurance brokerage industry, and analyzes the impact of the credit crisis and the ensuing global recession on merger and acquisition activity.
