Small Broker Survival Will Be Tested

Mergers and acquisitions within the brokerage sector constitute a trend that is prompting some industry watchers to forecast the near extinction of small-sized brokers.

Panelists speaking at Standard & Poor’s 2008 insurance conference say they expect M&A activity to pick up after experiencing a slower pace during the first half of the year.

The Council of Insurance Agents and Brokers in the United States is keeping its finger on the pulse of the market.

“Consolidation on the distribution side is continuing to happen, and it’s happening very, very aggressively,” Ken A. Crerar, council president, told CoStar Realty Information’s news Web site.

But he suggests the trend is for the better. “This industry has long been ready for consolidation. It’s driven by the need to be more efficient, by the need for stronger balance sheets.”

Crerar pointed to a study by industry consultant MarshBerry that concluded that ,  of 38,000 agencies in 2000, a full 22,754 pulled in less than $500,000 in commercial property/casualty revenue. The MarshBerry study concludes that than 19,000 of those will be out of business by 2015, a decrease of nearly 75 per cent in the market.

On the flip side, the number of agencies doing $10 million or more worth of business will triple by that time, according to the consultancy.

The response to its findings, released as MarshBerry’s 2008 Insurance Agency/Broker Value Forecast, has prompted the consultancy to partner with SNL Financial to host a one-day Summit to discuss and debate the future of insurance distribution. The Insurance Brokerage Summit will be held in New York City on September 16, treating attendees to a roster of top speakers.

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