MGAs have been a particularly attractive target for investors. These businesses typically specialize in a niche area (e.g., specialty fire coverage or fleet insurance for a large delivery organization) that requires depth. MGAs are known for creating value through underwriting excellence and their specific views of risk and risk profitability. (Credit: Adobe Stock)
Along with deal-making across a number of industries, merger and acquisition deal volume in the insurance space slowed over the past several years. According to S&P Global Market Intelligence data, the number of private equity and venture capital deals, in particular, dropped 28% in 2023, as investors grappled with high interest rates. However, over one-half of the total 2023 deal value for PE-backed insurance transactions involved brokers.
Private equity and strategic investors will continue targeting this market, given several favorable characteristics. Insurance product demand has remained strong despite economic turbulence, and financial investors are attracted to the sector's steady cash flow and "recession insulation."
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