Insurance Broking: 2016 Trends - Succession Plus

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Insurance Broking: 2016 Trends

Succession and Exit

Insurance Broking: 2016 Trends

By , March 9, 2016

In a white paper produced collaboratively between Succession Plus and Macquarie Bank in relation to insurance broking businesses, some interesting trends have been highlighted. Like all businesses, insurance brokers need to be aware of changes that present both threats and opportunities in their industry.

Traditionally, broking businesses have been valued and sold on the basis of a multiple of gross revenue. As with many other professions and businesses there is now an increasing trend to value on the basis of a multiple of profitability. This will obviously benefit those businesses that are well run, efficient and often use industry benchmarking data as a means of monitoring ongoing performance. The multiple that is used will depend on a number of factors but ultimately is a measure of risk within the business. That is, those broking businesses that manage risk well by having good systems in place, adopt appropriate corporate governance practices and strive as much as possible to reduce personal reliance on one or two key individuals, will attract a higher multiple than those businesses not doing these things.

MarshBerry, a prominent consulting firm offering services exclusively to insurance broking businesses in the USA, offers that there are three types of exit options for owners of insurance broking businesses: selling internally, selling externally and maintaining the status quo. MarshBerry would consider selling to other shareholders, employee share plans and internal sales or management buy-outs, all forms of internal sales and database sales, partial sales, trade sales, private equity/venture capital, sale to listed companies and listing, all forms of external sales. Maintaining the status quo, might otherwise be termed “doing nothing” or “ignoring the issue” or “putting it in the too hard basket”.

MarshBerry recommends that in insurance broking businesses a plan should be created that outlines how ownership will transition, how books of business will transition and how management responsibilities will transition. According to MarshBerry’s 2014 market and financial outlook survey, only 56% of insurance broking businesses have a plan to transition the books of retiring producers, with the average transition period taking 3.25 years. This is not an “overnight” or quick exercise if it is to be done effectively.



Scott Patterson

Director | Succession Plus

Scott Patterson has extensive business and professional experience, including over 20 years as a principal of a highly successful public accounting and financial planning firm. His passion is working with clients to improve the value of their businesses, and create a more certain future for them, their stakeholders and their families.

Scott's aim is to deliver strategic thinking, tailored advice and integrated solutions for family businesses, SME's and agricultural enterprises.

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