Consolidation slowed, but not halted as brokers battle for middle market: Advisen

Because size matters, the hurried pace of consolidation in the brokerage sector will be slowed only temporarily by the recession, according to an Advisen Ltd. report.
“Large brokers enjoy certain advantages of scope and scale,” said John Molka III, the author of the report on the insurance brokerage market. “At least in theory, their costs are lower, and they are able to provide a broader array of services.
“But small brokers are the engines of growth in the insurance market, and larger brokers will continue to acquire them to tap into their growth potential.”
The largest brokers have shifted their strategy from vertical integration to achieving a greater depth and breadth across more market segments, focusing on niche opportunities and the middle market, Advisen reports.
The middle market has long been the strength of mid-size brokers, many of which have pursued aggressive “roll-up” acquisition strategies to grow market share in this segment, Advisen says.
“The emphasis on middle market business pits the mega-brokers against second- and third-tier brokerage firms,” observed Dave Bradford, Advisen executive vice president. “Size has advantages, but smaller brokers historically have been quite successful in this sector.”