Specialty firm transaction activity in the first quarter of 2021 came out swinging with 37 transactions in the first quarter of 2021.
Specialty firm transaction activity in the first quarter of 2021 came out swinging. While transactions in the broader insurance distribution system were slow to get to the plate, specialty firms recorded 37 transactions in the first quarter of 2021 compared to 20 transactions announced for the same period in 20201. This is an 85% year-over-year increase and reflects a continued blistering consolidation trend of specialty firms that resulted in 125 announced transactions for the 2020 calendar year, a 29% increase over activity in 2019.
To highlight the rate of consolidation of specialty firms, MarshBerry estimates over 6% of such firms were acquired in 2020. If you annualize the 37 transactions announced in the first quarter of 2021 you arrive at 148 transactions. Should these numbers be achieved, which we think is likely, it would represent a 7.5% consolidation rate of specialty firms in 2021.
However, the number of transactions is not the only headline of note impacting specialty distribution.
The size of the firms transacting is impressive in its own right. For example, the past quarter saw Amwins, Inc., one of the largest specialty firms in the U.S. according to Business Insurance, announce plans to acquire Worldwide Facilities, LLC, a wholesale broker and delegated authority company distributing approximately $2 billion of premium on an annual basis. Some in the marketplace believe this transaction is a retaliatory response by Amwins, Inc. to an even larger transaction that occurred in 2020 where Ryan Specialty Group, also one of the largest specialty firms in the U.S. according to Business Insurance, acquired All Risks, Ltd., which is estimated to have been distributing approximately $2.6 billion of annual premium.
The implications of this activity are likely to translate to more pressure on smaller specialty firms, specifically those firms with $150 million and less in premium. To put it into perspective, MarshBerry estimates that after the transactions stated above, the four largest specialty firms will influence over 80% of the more than $80+ billion in premium in this space in 2021.
Historically high valuations and the challenges smaller specialty firms are experiencing in competing with their larger counterparts represent two significant influential factors driving transaction activity.
With 37 specialty firm transactions announced in the first quarter of this year, the pace is set for a homerun with a record number of transactions that will likely exceed last year’s results.
If you have questions about Today’s ViewPoint or would like to learn more about trends in value for specialty firms, please email or call George Bucur, Director, at 440.392.6543.
Source: MarshBerry proprietary deal tracking database.
1MarshBerry generally defines specialty firms as niche focused brokers and agents often referenced in the industry as program managers, program administrators, managing general agents, managing general underwriters, wholesale brokers, and/or general agents.
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