Canadian Underwriter

More P&C brokers set sights on employee benefits M&A: brokerage exec

November 29, 2021   by Canadian Underwriter Staff

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More P&C brokers than ever are recognizing long-term opportunities in what has become a hot employee benefits M&A market in Canada, a brokerage executive said.

“The trend of P&C brokerages moving into the employee benefits space will continue to grow exponentially,” predicts Yan Charbonneau, president and CEO of Quebec-based Synex Group, a member of the Canadian Broker Network.

While brokerages have faced competition in the P&C-driven M&A space – with three main types of buyers (those backed by insurance companies, those backed by private equity and the independents) all vying for a slice of the consolidation pie, Charbonneau said there isn’t much appetite from insurers to move into the benefits space.

“This left brokerages as the major players to start capitalizing on a fragmented, less sophisticated benefits market in Canada and build their businesses,” he added.

“We’ve seen a lot more commercial-focused P&C brokerages recognizing the opportunity of the two businesses being very similar,” Charbonneau said.

Depending on the size of the client, the same person would usually be handling both commercial insurance and employee benefits contracts.

That means commercial brokers will deal with the same decision-maker with whom they already have a good relationship. “The opportunity to talk to one person about adding the benefits product is there and the clients find a lot of value in this … it only strengthens the relationship,” he said.

From a management side, Charbonneau said it’s not more complicated for a P&C brokerage to run a benefits business: “The way the business is conducted is basically the same. The product is similar, and it becomes easier to have one master contract with sub-guarantees.”

While COVID-19 has temporarily impacted the employee benefits side – with staff cuts in smaller businesses leading to reduced premiums – Charbonneau said the market seems to be out of the woods, with national increases in costs of healthcare and medication set to hike premiums year over year.

Still, the recent rapid growth has fueled additional influx of private equity and easier financing to back up P&C firms’ M&A activity of benefits operations firms, he added, “so we expect to see tons more of these acquisitions down the road.”

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