Broker Revenue Growth Will Be “Modest” in 2011: Fitch

A new report from Fitch Ratings says that the prospects for revenue and earnings growth in the U.S. insurance broker market this year “will continue to be dampened by competitive fundamentals of the property/casualty insurance market, and limited increases in demand for broker services in the current economic environment.”

According to “2011 Outlook: U.S. Insurance Broker Industry,” Fitch expects “brokers’ reported revenue growth to be modest.” It says organic growth opportunities will be “challenged” by weaker property/casualty insurance pricing, which will suppress commission-based brokerage revenues. But a shrinking supply of acquisition targets of a size that would “significantly augment the acquirers’ total revenue streams” will constrain non-organic growth, according to Fitch.

But Fitch expects overall revenue growth to be driven by mergers and acquisitions this year. “As the economy recovers, the soft market continues to pressure premium and the reversal of the contingent commissions ban for the three largest brokers provides these companies with additional incentive to acquire smaller brokers that accept these commissions,” according to the report.