Today's Viewpoint: A MarshBerry Publication

View On The International Marketplace

Pulse survey results on the international insurance marketplace

MarshBerry reached out to more than 100 international brokers in more than 100 countries to take their pulse on the marketplace. Respondents hailed from Asia Pacific (10%), Europe (41%), Middle East & Africa (10%), North America (24%) and South & Central America (14%). Their feedback, both from an organic growth and from an acquisition perspective, might surprise you.

On average, respondents are expecting organic growth for calendar year 2020 of 8%. While top US based firms Q2 2020 earnings reports indicated flat to moderate organic growth, revenue overall is up. Most brokers are anticipating at least a quarter, or in some cases two quarters of declining organic growth (Q2 and/or Q3 most often), the first quarter of 2020 was particularly strong and there is much optimism for organic growth by years end.

Some 90% of all respondents anticipate 2020 organic growth to be positive. The single largest cohort responding to the organic growth question, approximately 41% of respondents, indicated an anticipated +10% organic growth rate for 2020. Given the global economic shock resulting from COVID-19, this figure is surprising and further reinforces the stability and resiliency of the insurance distribution system. It is important to note that the international brokers surveyed typically have a revenue base that is diversified across multiple industries and a strong concentration in P&C, which is enjoying a hard market across the globe. So, the strong organic growth, while surprising, is not necessarily unfounded. Other than those industries such as hospitality, public entertainment, sports and restaurants that have been hit especially hard, most other industries remain in reasonable shape; hence the optimism of these brokers. Some will take a hit as 10% of respondents predict negative organic growth for the year, perhaps reflecting the negative effects of insuring industries more severely impacted by the pandemic. While most of the commentary suggested insurance brokers have yet to feel the full impact of COVID-19 (premium forbearance impact on cash flows, bankruptcies, reduced payrolls, etc.), few if any are screaming like Chicken Little; most remain optimistic about the future.

When it comes to acquisitions, international brokers appear to be as interested as they were pre-pandemic. Twenty-three percent of respondents have an increased interest in acquiring and are open to introductions and want meetings. In addition, 69% have the same level of interest in closing deals while only 8% indicated that their acquisition interest has decreased.

MarshBerry’s own experience mirrors what is outlined in this survey. While we have experienced a more scrutinous due diligence process by the buyer market, there are only a few cases where a seller was of less interest than pre-pandemic. And in those cases, it was largely because of a concentration in an industry hit by COVID-19. On the whole, buyers are being more selective and allocating more time and resources dedicated to confirmatory due diligence if there appears to be material exposure to the hardest hit sectors of the economy. Moreover, while valuation multiples for platforms have actually increased deal structure in certain circumstances has shifted to transfer some risk to sellers in the form of longer earn-outs, live-outs and true-ups where there is question of a seller’s ability to maintain historical earnings power.

Overall, buyers are optimistic that 2020 will end up producing positive organic growth. Equally important, buyer demand to vet potential acquisitions and remain price competitive has not dried up, even in a world where most would agree that the future is hazy.

If you have questions about Today’s ViewPoint, or about activity in the international M&A marketplace, please email or call Michel Schaft, Managing Director – MarshBerry International, at +31 6 53 66 75 21.

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Contact Michel Schaft
If you have questions about Today's ViewPoint, or would like to learn more about how MarshBerry can help your firm determine its path forward, please email or call Michel Schaft, Managing Director, at +31 6 53 667 521.

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