Calls of peak in insurance broker deals prove wide of the mark

Cantillon: No lack of foreign private equity money chasing insurance brokers

Insurance brokers may bemoan that getting coverage capacity into the Irish insurance market has been an uphill struggle in recent years, as insurers struggle to make returns from employer and public liability and potential new entrants baulk at the general political and public noise around the industry.

Charities, play centres, festivals and events and travel agents are among the dozens of sectors and subsectors struggling to get coverage or are down to one underwriter, according to the Alliance for Insurance Reform.

But there’s no shortage of foreign cash – specifically private equity money – chasing insurance brokers themselves.

Last year saw the likes of Campion Insurance being acquired by private equity-backed UK brokerage group PIB for more than €70 million; Arachas, which is ultimately backed by US private equity companies Madison Dearborn and HPS Investment Partners, snap up Hooper Dolan for a figure believed to be north of €60 million; and private equity firm MML Growth Capital Partners Ireland's Innovo brokerage vehicle, set up in 2019, continue on the buyout trail.


But as 2021 was coming to an end, some sector players concluded that activity would have to quieten down, as deals multiples had got to high levels of eight to 10 times’ operating earnings, up from five to six times around the middle of the last decade.

Snapped up

That prediction has proven well wide of the mark. The past few months have, for example, seen UK broker Aston Lark, among the most active industry acquirers in the market in recent years, snap up its eighth Irish brokerage, PIB strike another deal and Dublin-based LHK Group mop up smaller Dublin peers.

Last week, Kerry-based Gallivan Murphy Insurance Brokers agreed to be bought by a private equity-backed Assured Partners of the US, in a deal said to be worth more than €100 million. And, on Monday, New York-based brokerage NFP, also backed by Madison Dearborn and HPS, announced its third Irish deal in as many years, with the planned purchase of ReSure Corporate Brokers in Dublin.

Even in downturns or a pandemic, businesses and households still have to renew their insurance policies. As such, private-equity firms see fees earned through insurance distribution almost as an annuity business, which allows them to load up deals with large levels of borrowings.

Brokers say they more than justify their fees due to the volume of work that goes into researching the market for clients, preparing paperwork on contracts, and dealing with regulation and compliance. But if private equity is involved, someone’s getting squeezed.