How is the increase in mergers and acquisitions (M&A) impacting the insurance industry? This was the question put to specialists from Talbot Jones, CFC, Ardonagh Advisory, Close Brothers Premium Finance, Howden, Gallagher and Ignite Systems in the latest of Insurance Business’s ‘Big Question’ series.
For CFC’s Pat Brice who has been in the industry for over 25 years, he has seen that M&A activity has been a constant within the market and one which breeds innovation and ambition. Great brokers acquire great businesses, he said, while the pipeline continues to evolve as entrepreneurial people strike out on their own and build up new businesses.
“In a really tough economic environment, the insurance sector is still thriving,” he said. “Investment companies still want to invest in the insurance business because it’s a really solid source of revenue with loads of innovation. I think that can only be a good thing and I think it’s going to continue.”
For Howden Group’s Peter Blanc, it’s not a question of whether M&A is a good or a bad thing, it is simply inevitable. There are still about 1,700/1,800 brokerages in the UK, he said, around 700 of those have more than 10 staff and on average the principals of those brokerages are now in their late 50s.
“So inevitably, people are thinking about retirement and succession planning,” he said. “And of course, there are loads of other challenges for smaller brokers to face including regulation, compliance, and actually simply just the challenge of growing. It’s really difficult to grow a small insurance broker if you can’t afford to make acquisitions, and taking on talent is a very expensive and sometimes pretty risky proposition.”
