The commercial insurance brokerage sector saw a steady increase in mergers and acquisitions over the past year as firms continue to position themselves for growth in a soft property/casualty insurance market and extend their capabilities in growth areas, such as benefits.

There's no sign that will change anytime soon. That was evident in recent weeks when Willis Group Holdings P.L.C. and Towers Watson & Co. unveiled plans to merge in an $18 billion deal, which will give Willis access to Towers Watson's private health insurance exchange, among other things.

“Some brokerage company is selling out to another brokerage company every day,” said J. Paul Newsome, managing director at Sandler O'Neill & Partners L.P. in Chicago.

Despite the softening property/casualty insurance market and continued uncertainty over a slowly growing global economy, the world's 10 largest brokerages maintained their rankings with a collective 6.5% gain in 2014 brokerage revenue, which grew to $41.1 billion, according to Business Insurance's annual survey.

Arthur J. Gallagher & Co. registered the largest increase among the top 10, with a 28.7% jump in 2014 brokerage revenue that reflects its aggressive acquisition strategy. Its 2014 purchases included the $938 million deal for Australia's Wesfarmers Ltd.

Brown & Brown Inc., which also has grown through acquisition, reported a 15.6% increase in income, followed by Hub International Ltd. at 12.9% and Lockton Cos. L.L.C. at 10.2%.

Only one member of the world's top 10 reported a decline in brokerage revenue: Wells Fargo Insurance Services USA Inc., which has been divesting, selling 40 insurance brokerages and consulting offices to USI Insurance Services L.L.C. in 2014. Wells Fargo reported brokerage revenue dropped 3.8% in 2014, the fourth annual decline in a row. That left it just ahead of No. 9 Hub International Ltd.

Among the 10 largest brokers of U.S. business, Marsh & McLennan Cos. Inc. regained the top spot that Aon P.L.C had held for two years, and USI Holdings Corp. took the No. 8 spot from Lockton Cos. L.L.C., both with slightly faster growth rates than those of their rivals.

Newcomers and familiar faces

A couple of brokerages among the top 100 brokers of U.S. business saw rapid growth. Acrisure L.L.C., No. 19 on the top 100 list, reported a 147.1% acquisition-driven increase in brokerage revenue, while Jardine Lloyd Thompson Group P.L.C., which has made a significant recruitment push in the U.S. over the past year, reported a 122.5% increase in U.S. revenue. Edgewood Partners Insurance Center, which jumped to No. 23 this year from No. 44 last year, was the only other top 100 U.S. broker reporting a triple-digit increase in revenue, with 108.4%.

On the other side of the acquisition coin, No. 63 U.S. broker William Gallagher Associates Insurance Brokers Inc. is set to be acquired by Arthur J. Gallagher & Co. later this year.

M&As are on track to make 2015 a record year, said Phil Trem, vice president of mergers and acquisitions at Willoughby, Ohio-based Marsh, Berry & Co. Inc. He said 148 deals announced in the first five months of the year are the largest five-month total since MarshBerry began tracking brokerage M&As in 2005.

“We expect 375 to 400 announced deals this year,” Mr. Trem said, surpassing the previous record of 325 in 2012.

“It's absolutely a seller's market,” with high valuations making agency owners consider selling, Mr. Trem said. “Firms that never thought about selling are testing the waters.”

Factors spurring the moves include still-low interest rates that limit profits as well as generally flat insurance rates, prompting brokers to grow by acquisition as well as expanding the coverage they offer.

Commercial property/casualty rates are flat or declining slightly, said Bobby Reagan, CEO of Atlanta-based Reagan Consulting.

“People are learning to live with the world we've got,” he said. “A lot of agents are stepping up their sales focus. The firms that really are stepping out will have one or more areas of specialization where they gain competitive advantage.”

Mr. Reagan described brokers' 2014 results as “pretty steady.” Reagan Consulting's quarterly organic growth and profitability study showed that the median industry organic growth was 6.2% in 2014, almost identical to that in 2013 and 2012.

“We've had three years of steady solid organic growth,” Mr. Reagan said. For the first quarter of 2015, organic growth was 5.8% and “we're anticipating it will probably be in the mid to higher 5% range” for all of 2015, he said. “Overall, the market is strong.”

The insurance brokerage market in general was a “relatively good group” in terms of performance, said Mr. Newsome. It was “not extremely better or worse than the overall market,” he said.

Several brokers are looking for growth in the benefits arena, Mr. Newsome said.

That includes Willis, which cited Towers Watson's exchange as one factor in the deal it announced in recent weeks. “The hottest topic is the (private) insurance exchanges and how quickly those businesses grow,” Mr. Newsome said.

“Aon is probably the one that's the most prominent,” he said. “It was early in developing its own health insurance exchange.”

Timothy J. Cunningham, Chicago-based managing partner at consulting firm Optis Partners L.L.C., said despite flattening rates, pockets of higher pricing remain, such as coastal property coverage and public company directors and officers liability insurance.

“We're still seeing some economic growth, which kind of offsets” lower rates, he said.

“We are starting to see some kind of economic growth again in Western Europe, which is a decent market,” said Meyer Shields, managing director at Keefe Bruyette & Woods Inc. in Baltimore. That growth could compensate for the pressure on rates, particularly for the large international brokerages, he said.

The rate environment affects different brokers in different ways, said John Wicher, principal and founder of San Francisco-based John Wicher & Associates Inc.

For Marsh, Aon and Willis, the strong dollar has negatively affected their earnings. Those brokers are fee-based, so rates aren't going to affect their value proposition with their clients, he said.

“Then you move to Gallagher, Lockton, Brown & Brown — they continue to realize most of their revenue on a commission basis. The flat to declining rates have affected them,” he said. For such brokers that dominate middle-market business, the biggest challenge is finding good people, said Mr. Wicher.

Mr. Wicher added that another trend affecting the brokerage landscape is banks shedding their insurance business, which means they are reducing their role in competing for middle-market business. The main exception is BB&T Insurance Holdings Inc., he said.