What’s behind private equity investment in insurance brokerages

U.S. insurance brokerage deal volume has increased dramatically over the past 10 years, and that increase is primarily driven by private equity investment.

Two KPMG analysts examined how private equity involvement is driving market consolidation during KPMG’s recent Future of Insurance Symposium.

Insurance brokerage transaction volume rose by 293% between 2013 and 2021, and private equity-backed consolidators drove that increase, said Peter Soloman, principal at KPMG.

Private equity likes insurance brokerages, with PE investments in insurance brokerages valued at around $100 billion, said Michael Scherer, KPMG U.S. deal advisory and strategy insurance leader. In addition, 11 of the top 20 largest North American retail insurance brokers are private equity-backed. Scherer listed some reasons why insurance is attractive to private equity.

• Predictable and recurring cash flows. About 90% of revenue recurs annually.
• Significant disaggregation in the middle market. About 40,000 independent insurance agencies in the U.S., and an aging owner force without a succession plan, mean that the insurance brokerage market is ripe for consolidation.
• With consolidation comes the opportunity to sophisticate smaller insurance agencies with technology modernization, new capabilities and centralized operations.
• Insurance is a resilient industry. Even in an economic downturn, people still need insurance.

Private equity deal activity in insurance reached a high in 2021, but rising interest rates and a softening premium rate environment have led to a reduction in PE deal activity, Soloman said. Consolidation is still happening, but the number of active consolidations is declining as many PE-backed platforms focus on quality instead of the quantity of mergers and acquisitions.

PE is increasing hold periods

Not only is private equity deal activity in insurance slowing down, but private equity is keeping their investments longer, Soloman said.

The average PE hold period of insurance brokerage platforms rose to a high of 6.5 years in 2025 from a low of 4.2 years in 2021. Sponsors are focused on doing what they can during their hold period to make their platform as attractive as possible to the broadest range of potential acquirors.

As PE-backed insurance brokers focus on investing in their platform, they are preparing their business for the broadest range of exit options, Scherer said. Those focus areas include preparing for an initial public offering, optimizing data and upgrading finance functions. Sponsors also are investing in tools that can drive organic growth.

What's next for PE?

Now that many PE platforms have reached levels of scale, the next step is figuring out how to make them investment-class assets, Scherer said.

“While an IPO exit may be an option, there is a viewpoint that we need to make sure these assets are ready to be put into a public company,” he said. “What are the gaps between public company-ready and where we are today? It’s putting a road map in place to make sure these assets are attractive to public markets, whether that be via an M&A sale to an existing public broker or going through an IPO ratings process.”

Platforms are taking stock of what the business looks like, Soloman said.

“It may have grown through M&A over a period of time and have acquired a bunch of different businesses; maybe some have different subsectors,” he said. “In this environment, platforms are focusing on what they do well and what they want to be known for.”

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