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Insurance broker mergers and acquisitions continue amid the COVID-19 pandemic as private equity capital invests in the sector, a panel of experts say.
Deals between insurers may also pick up as low interest rates and pressure from losses could drive consolidation, they said.
“We’re seeing continued high levels of interest among private equity investors looking for platform investments in the insurance brokerage market,” said John Hendrix, managing director, Piper Sandler Cos. in New York.
He was speaking Thursday during an online panel sponsored by S&P Global Market Intelligence, a division of S&P Global Ratings Inc.
Prices being paid for brokers “are at all-time highs,” and there is no shortage of buyers, Mr. Hendrix said.
Michael Goldman, senior vice president, corporate development at CopperPoint Insurance Cos. in Phoenix, said it was a “simple analysis” for investors to deploy capital rather than hold it at current low interest rates.
Given the changed circumstances, however, brokers must be able to show they can conduct business remotely, Mr. Hendrix said.
“The pandemic has really accelerated the importance of the technology platform and the ability to work with distribution channels with technology,” said Anne Ross a partner at law firms Foley & Lardner LLP in Madison, Wisconsin.
Insurers, meanwhile, face challenges which could drive them to seek mergers or acquisition.
“What we’re seeing is a number of companies under some sort of pressure and in some instances distress,” driven by losses including casualty and property, Mr. Hendrix said.
Insurers also face declining investment income, and some are also still dealing with business interruption insurance litigation, said Ms. Ross.
A hardening insurance market rates could attract private equity buyers, Mr. Hendrix said.
Mr. Goldman said that, in addition to a hardening landscape for many property/casualty lines, the market is also “seeing the first signs that rate decreases are becoming less likely for the workers compensation line.”