Insurance services firms well-positioned for growth: Report

The outlook for insurance services firms, including insurance brokers, health services companies, and warranty and claims administrators, is stable, Standard & Poor’s Global Ratings said in a report Thursday.

The sector should benefit further from rising insurance prices, which may moderate into 2021, and will likely see continued merger and acquisition activity, the report said.

“We now expect most brokers we rate to close out the year at flattish to slightly positive organic growth – light for a normal year but a win for 2020, in our view,” S&P said 

Companies in the group proved resilient in 2020.

“While trends varied by subsector, insurance service firms have shown overall resiliency amid the pandemic and global economic downturn,” S&P said. “We believe all subsectors will demonstrate growth and profitability in 2021, though risks remain relative to the pandemic and still fragile economic recovery.”

S&P economists forecast global economic expansion to resume in 2021.

“We believe brokers are well-positioned for solid growth and profitability in 2021, though risks and uncertainty certainly remain with the pandemic still abound and the economic recovery in fragile early innings. Overall, we believe insurance brokers will demonstrate solid performance this year,” S&P said.

Brokers should continue to benefit from rising insurance rates and prices, S&P said. “We expect continued price momentum, albeit at a slowed pace, in 2021.”

Mergers and acquisition activity is expected to remain robust. 

“The seemingly endless broker M&A frenzy boils down to supply and demand basics that will likely endure,” the report said.

Capital remains abundant, with easy access to inexpensive credit, the report said.