According to Fitch Ratings, a global credit rating agency, US and Canadian insurance brokers are increasingly relying on larger acquisitions to maintain momentum as organic growth slows.
Fitch Ratings explained that while heavier borrowing makes balance sheets more vulnerable, the industry’s stable cash generation and history of withstanding economic downturns help offset those risks.
Insurance brokers, in Fitch’s view, can sustain more leverage than many other corporate sectors thanks to their consistent free cash flow and the essential nature of their services.
Organic growth in property and casualty insurance remains positive but has moderated. Fitch pointed to Swiss Re’s projection that US premiums will expand by 4%–5% in 2025 and 2026, but noted that brokers such as Brown & Brown and Arthur J. Gallagher have already slowed to low- to mid-single digit growth in the first half of this year.
The agency said that after benefiting from inflation-driven premium increases and property appreciation in 2023 and 2024, brokers are now facing headwinds as higher interest rates weigh on property values and limit the chance of a quick pricing rebound. Cyber coverage and financial lines are also showing signs of weakness, while casualty trends remain supportive of steady growth.
With these organic gains easing, Fitch Ratings emphasised that acquisitions have become a central lever for expansion. Deal activity has not only accelerated but has grown substantially in size, with five major transactions among Fitch-rated firms totalling about $60 billion in the past two years.
By contrast, the agency noted, annual totals between 2013 and 2023 typically ranged from just a few billion dollars to $20 billion across hundreds of smaller transactions.
Fitch said larger brokers such as Aon, Marsh & McLennan, and Gallagher remain active acquirers. Their size, financial flexibility, and global reach give them the ability to integrate large deals while maintaining resilience in softer market conditions.
Although these acquisitions have reduced their ratings headroom, Fitch stressed that no downgrades have taken place to date and expects leverage to return to within tolerance ranges within two years of closing.
The agency cautioned, however, that the risks are more acute for private brokers backed by financial sponsors. Fitch observed that some of these firms operate with extremely high leverage, at times 8–10 times EBITDA, and interest coverage below 1.5 times. Such aggressive financial structures, it warned, leave them more exposed if organic growth weakens further or borrowing costs rise.
Despite these concerns, Fitch Ratings underscored the resilience of the sector. During the 2008 financial crisis, large public brokers saw only modest declines in revenue and earnings, thanks to flexible cost structures and the essential demand for insurance products. With limited recurring cash needs beyond taxes and interest, Fitch believes brokers are well placed to adjust during periods of stress.
Looking ahead, the agency expects these dynamics to help the industry endure even if the market enters a multi-year period of softer property and casualty pricing.
Fitch concluded that investment-grade brokers with diversified businesses are best positioned to handle volatility, but warned that heavy reliance on acquisitions can obscure underlying weakness in organic performance. Monitoring those fundamentals remains critical.
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