Fitch Ratings sees a clear shift in the playbook. Insurance brokers across the US and Canada are leaning harder on big acquisitions to keep expansion alive, even as organic growth softens.
The deals aren’t small. Over the past two years, five transactions among Fitch-rated firms hit roughly $60 bn in value.
That’s a stark contrast to the decade before, when annual totals usually landed between a few bn and $20 bn across hundreds of smaller pickups. The trend reflects a strategy change—and heavier leverage comes with it.
Debt-financed buying sprees add credit risk, Fitch said. Balance sheets carry more strain, interest obligations pile up, and ratings headroom narrows.
Still, the agency argues brokers can shoulder higher leverage than most corporate sectors. Reliable free cash flow, essential services, and a record of resilience through downturns give them room to stretch.
Organic growth hasn’t evaporated but has slowed. Swiss Re projects US property and casualty premiums will grow 4%–5% in 2025 and 2026.
Yet Brown & Brown and Arthur J. Gallagher reported only low to mid-single digit growth in the first half of this year.
Inflation-driven premium hikes and property appreciation helped brokers in 2023 and 2024, but higher interest rates are pressing down property values and muting any chance of quick pricing recovery. Cyber insurance and financial lines look weak. Casualty still offers steady gains.
The biggest names—Aon, Marsh & McLennan, Gallagher—keep buying. Their global reach and balance sheet flexibility mean they can absorb large acquisitions while riding out softer conditions.
Fitch said ratings headroom has tightened but no downgrades have followed, with leverage expected to fall back within tolerance in about two years.
Private brokers backed by financial sponsors tell a different story. Fitch flagged firms running at 8–10x EBITDA leverage and interest coverage under 1.5x.
Those numbers look dangerous if organic growth cools further or borrowing costs climb. Aggressive financial engineering leaves them more vulnerable.
The sector’s history, though, is one of toughness. During the 2008 financial crisis, large public brokers saw only modest declines in revenue and earnings.
Flexible cost bases, steady demand for insurance, and limited recurring obligations beyond taxes and interest cushioned the blow. Fitch expects similar endurance if property and casualty pricing stays soft for years.
Investment-grade brokers with diversified businesses stand in the best position, Fitch said. Yet the agency warned against letting M&A headlines mask weakening fundamentals. Acquisitions can keep numbers up, but the real measure of strength remains organic growth.
