Insurance M&A: Is dwindling supply driving focus away from broker deals?

For years, the UK insurance sector set the pace in a period of rapid consolidation that continues to sweep across much of continental Europe. The UK regularly topped rankings for both deal volume and value across Europe as consolidators - many backed by private equity - built scale and expanded their service offerings by acquiring smaller brokers.

Increasingly, however, it appears that the UK is no longer the focal point of insurance M&A, with activity slowing down over recent periods. So far in 2025, in particular, there has been a sharp drop in activity, seemingly driven by a decline in supply.

According to many industry observers, years of intense consolidation mean that the insurance M&A market has now matured and that the peak of activity has passed, with the focus of the ongoing wave of dealmaking now moving to continental Europe.

This is not to say that activity in the UK has dried up. The decline has occurred from what was a very high base of activity, meaning that even after a sharp decline, insurance remains a busy M&A market.

However, there is no doubt that the landscape has changed, with indications being that many buyers are increasingly turning their focus either to smaller deals or to integrating their (numerous) previous acquisitions.

State of the insurance sector in 2025
The UK insurance sector is a large industry, comprising a significant number of companies offering a diverse range of services and employing more than 300,000 people across the UK.

There are several main types of companies operating in the sector, the primary type, of course, being companies that actively provide insurance coverage to customers. These are generally split between life companies (offering life insurance, long-term savings and pensions) and non-life companies (covering property, motor, liability etc). According to the most up to date figures available, there were 429 insurance companies operating in the UK in 2023.

The bulk of the sector, however, is the insurance brokers segment. In brief, brokers are intermediaries that help individuals and businesses to find insurance policies that work for them, by assessing their clients’ needs, research options, negotiating terms and managing the policy, including claims and renewals.

There are thought to be more than 1,700 brokers currently operating in the UK, a figure that spans large, national firms, medium-sized regional operators, small local businesses and individual independent brokers.

The last main type of company within the sector is managing general agents (MGAs). MGAs are also intermediaries, but as opposed to brokers, manage insurance on behalf of carriers, handling functions such as underwriting, binding coverage, claims and distribution. MGAs often specialise in niche or complex areas of insurance.

As of 2024, there were thought to be more than 350 MGAs operating in the UK. While this makes them the smallest of the three main types of insurance business, they are also thought to be the fastest-growing, with low barriers to market entry and high levels of startup activity.

In terms of company size, the vast majority of operators across the sector are small businesses with under £15 million in turnover and many generate less than £5 million.

Given this, it is unsurprising that the majority of companies have small headcounts too, with FCA data from 2023 indicating that the average employee headcount for a brokerage is under 50 staff and that the majority, as micro/small firms, employ 10 or fewer staff.

At the upper end of the market, there are relatively few large firms that generate more than £50 million in turnover or that employ teams bigger than 250 staff. However, those that do fit into this bracket, such as £48bn-turnover Legal & General - which employs 12,000 staff - are so big that they comprise the vast majority of the sector’s turnover and staff headcount.

Activity in 2025 so far
The story of insurance M&A so far in 2025 has been of a steep decline. According to Marshberry’s H1 2025 update, there were just 49 deals in the UK insurance sector during the first half of the year, down 35 per cent from the same period in 2024.

Over the course of the first half of the year, there was just one month which saw a double-digit number of transactions (April), with June seeing just five deals - a sharp drop off from the average monthly deal count of 11 transactions seen from 2020 to 2024.

Marshberry’s John Nisbet also noted how there was a shift in how deals were spread between different buyers, with H1 2025’s 49 deals involving 37 different acquirers and no single buyer announcing more than three deals during the period.

This again posed a marked contrast to 2024, which, like previous years, saw a large number of deals by serial acquirers. Major consolidator JMG Group, for instance, completed 16 broking acquisitions last year, while nine separate buyers completed at least five deals.

Crucially, and perhaps providing an indication of the long-term changes now shaping insurance M&A, there was also a decline in private equity-backed activity. During the first half of 2025, 41 per cent of announced deals in the UK involved private equity, below the long-term average.

During 2024, 51 per cent of deals were private equity-backed, which itself was a long way below the levels of 71 and 70 per cent seen during 2020 and 2021 respectively. While Marshberry forecast that PE-backed activity could pick up considerably during H2 2025, the longer-term drop in private equity involvement suggests that interest among investors may have peaked.

Summing up where insurance M&A stands at the mid-point of 2025, Marshberry described the situation as being “more likely a new normal” than a temporary dip.

Nisbet writes: “Creating lasting value from a domestic consolidation strategy has become more difficult. A buy-and-build strategy in UK broking has never been a slam dunk, despite what some PE firms that entered the sector may have thought.”

According to Nisbet, the moderation of deal multiples has now reduced the ability of buyers to create value from multiple arbitrage. This has led to “increased recognition that a measured and discerning approach to deals, with a focus on fit and integration, is the most reliable way to create lasting value.”

Deal size reflects maturity of the market
As long ago as 2023, industry experts were pointing out that consolidators were increasingly required to “reach down” and target smaller acquisitions in order to maintain the same levels of activity they had enjoyed over previous years.

This trend seems to have come to the fore even more prominently during 2025, with 69 per cent of announced deals during the first five months of the year involving targets valued at less than £5 million, a significant increase on the long-term average of 59 per cent of deals involving firms of this size since 2016.

Further illustrating this shift, only 14 deals during the first five months of the year involved a target company with more than 20 staff, while just three deals during H1 involved a company with 100 or more staff.

Increasingly, it appears that the high levels of consolidation apparent over the past decade or so have resulted in declining supply of high-quality mid-market targets in the broker segment of the sector.

This has also been seen at the opposite end of the market, with a number of major transactions valued at more than £100 million completed in the sector so far this year, running ahead of the long-term average for deals of this size.

According to Marshberry, the number of privately-owned brokers available to acquire is falling, while formation of new brokers is limited and the ability of new entrants to scale remains constricted.

Over recent years, broker deals have come to dominate the insurance market and have played a huge role in driving the wave of consolidation that the sector has undergone.

For buyers, broker deals were highly attractive due to the relative ease of integrating them in comparison to deals involving insurance carriers, as well as their strong, predictable financials and specialisations that often enabled buyers to consolidate their market position in one particular sub-sector, or expand into another.

However, perhaps the widespread fragmentation of the market is perhaps just as important to its popularity, enabling large consolidators and other buyers to build scale rapidly without relying on organic growth.

According to FCA data, there were 6,637 active brokers working in the UK in 2015, clearly showing an area of the market ripe for consolidation. A decade of consolidation later, however, and that figure had dropped by more than 1,100 to 5,516 in 2024 - a decline of 16.9 per cent.

(Please note, these figures indicate active registered brokers, rather than the narrower count of regulated brokerage companies)

While this still represents a serious degree of fragmentation, it seems that a reduction in the most attractive mid-market brokers is forcing buyers to either look further down at smaller targets, set their sights on bigger acquisitions or focus instead on integrating their previous acquisitions in order to maximise their value.

Deva Risk Group, an insurance firm backed by The Broker Investment Group (TBIG), has completed a number of acquisitions over the past year in an M&A strategy that has seen it target regional brokers.

In May 2025, the company acquired North Wales brokerage David Vaughan & Co, a provider of SME commercial and personal lines insurance that has been trading for more than 51 years, with £1.2 million in gross written premium.

Deva Risk Group director Peter Goddard said that David Vaughan & Co was a strong fit for the group as a result of its experienced team and loyal client base across North Wales. The acquisition was the company’s second in North Wales, following its takeover of Wrexham-based Tudor House Insurance.

The deal also represented TBIG’s fourth takeover of 2025 so far, with CEO Dave Clapp saying that the company’s strategy of targeting regional brokers had put it on course to reach GWP of £14 million by the end of this year, with a target of £20 million by the end of 2027.

Market conditions force PE rethink
Much activity in the UK’s insurance market continues to be driven by private equity firms and the platform companies they use to run their buy-and-build strategy. However, as mentioned, the number of deals with PE involvement during the first half of the year (41 per cent of the H1 2025 total) is running significantly below the average seen over recent years.

Despite MarshBerry saying they expect PE activity to pick up during the second half of the year and the fact that the majority of high-value transactions completed so far in 2025 saw PE involvement, the drop in dealmaking does indicate the changing UK insurance M&A market.

Analysing the trends that could have contributed to the dip in PE activity in their February 2025 report, Norton Rose Fulbright wrote that it reflected “anecdotal comments from clients that the maturity of the PE model in the UK broker market was making the discovery of high-quality targets harder”.

The report continued that, prior to interest rates returning to more normal levels, the “fierce competition” for the best assets in a diminishing pool of mid-market brokers “had pushed purchase prices unsustainably high”, putting further pressure on dealmakers.

While valuations may normalise slightly from the inflationary levels seen just a few months ago, many of these trends are long-term and inextricably linked to the fact that the broker market has matured significantly over the past few years.

Whereas this has forced many strategic buyers to look at the smaller end of the market, private equity buyers are perhaps less willing to compromise on their ideal acquisition profile and, as a result, some shifts in private equity buyer trends already appear to be taking shape.

Some private equity buyers have shifted their focus to speciality, MGA and wholesale targets. Others that have previously focused on consolidation in the UK broker sector, meanwhile, are now said to be turning their attention to the European market, which remains highly fragmented.

Norton Rose Fulbright wrote that “many UK consolidators have been looking more closely at opportunities in Europe” with “strong trends for deals in Spain and significant interest in French and German deals throughout the year.”

Despite the report correctly highlighting that the structural variations between different countries in Europe often make these transactions harder to execute, it seems that continental Europe is increasingly meeting the acquisition criteria that private equity firms are seeking.

This is not to say that private equity activity will no longer play a major role in UK insurance M&A activity, with PE-backed consolidators such as Ardonagh recently announcing new investments to fund further acquisitions.

However, there are signs that the focus of private equity firms and their platform companies may shift to different areas of the market and that UK consolidators may begin to look further afield for the best targets.

Speciality targets coming to the fore
As well as prompting some buyers to examine international acquisitions, the maturity of the UK broker sector is also leading private equity and strategic buyers to examine acquisition targets in other areas of the insurance industry.

According to Norton Rose Fulbright, many private equity buyers are now shifting their focus to the speciality, wholesale and MGA markets, with the MGA market in particular increasingly crowded amid “a proliferation” of new startups. While it remains a far smaller segment than the brokerage area, MGAs are seemingly growing at a far faster rate.

The report adds that start-up activity in the MGA area is being driven by “good news stories” inspiring high-performing underwriters to seek greater value by setting up independently, as well as due to technological developments and a general desire to gain freedom by operating outside of a traditional insurance company.

As a result of the rate of start-up creation, the MGA sector is becoming increasingly overstuffed. While this means a higher proportion of failed or underperforming businesses when compared to other sectors, affecting valuations and investor confidence, it also means a high degree of fragmentation.

Norton Rose Fulbright point out that “monoline” MGA businesses are more prone to failure than MGA’s with diverse portfolios of lines, which are more resilient and more exposed to potential avenues for future growth.

These businesses are of far higher value and, as such, more attractive to private equity buyers seeking to expand into the sector. Monoline businesses, however, are not unattractive and can offer strategic buyers or private equity-backed consolidators opportunities to expand their offering into a specialised line with small, cost-effective acquisitions.

These factors, coupled with the maturity of the UK broker market, have arguably contributed to specialty insurance firms (MGAs and wholesalers) becoming more sought-after acquisition targets so far in 2025.

According to Marshberry, acquisitions of specialty distributors accounted for close to a quarter (24 per cent) of total announced M&A activity in the UK insurance sector during the first half of the year, with retail broking deals comprising the remaining 76 per cent.

While this still illustrates the significant gulf between activity in these two key areas of the market, it also represents a considerable shift from recent years. In the full year 2024, for instance, specialty distributors accounted for 16 per cent of the total announced M&A deals, with brokers making up 84 per cent.

In fact, you have to go back five years to 2020 (a year in which M&A across all sectors was severely disrupted by the COVID-19 pandemic) to find a year in which acquisitions of specialty distributors reached as high as 24 per cent across the course of the entire year.

Pre-COVID, the last year to see that level of specialty distributor M&A was 2017, in which such targets accounted for precisely a quarter of the year’s total.

Echoing Norton Rose Fulbright, Marshberry points out that MGAs are forming at a far quicker rate than brokers, which face significant market entry barriers, and that, as a result, the “increasingly dynamic MGA segment in the UK and, indeed, Europe more widely is expected to see continued M&A activity through 2025, involving both domestic and overseas buyers, with a number of sizeable targets currently being marketed for sale.”

PIB Group is a specialist insurance intermediary backed by Apax and The Carlyle Group. In March 2025, the company strengthened its position in the litigation insurance sector with the acquisition of Litica, an MGA that provides insurance-backed solutions for litigation and arbitration cases.

Founded in 2019, Litica has established itself as a major operator in litigation insurance, providing tailored packages to individuals, businesses and law firms. The company has also expanded its operations into Germany, the US and Australia.

The deal bolsters PIB Group’s presence in litigation insurance, a sector seeing significantly rising demand as individuals and businesses seek greater financial protection against legal disputes. In addition, the move was described as bolstering its capabilities in specialist underwriting and risk management across a number of jurisdictions.

Tech could drive more M&A, but also bring regulatory change
Tech, especially AI, is driving rapid transformation across many sectors, including the insurance industry. According to a 2024 survey by the Financial Conduct Authority (FCA) and Prudential Regulation Authority, 75 per cent of firms were already using AI last year, with a further 10 per cent planning to incorporate it within the next three years.

AI technologies are already widely used across areas of insurance such as underwriting, actuarial analysis and fraud identification, but there are bound to be many more new applications rolled out over the coming months and years as generative AI continues to develop.

As AI becomes more embedded in the everyday functioning of the sector, insurance firms will come under growing pressure to keep pace with AI adoption and not risk being left behind by counterparts that tap into new and emerging technologies more quickly and/or effectively.

As well as significant investments in technology, this could also generate significant M&A activity, with acquisitions representing a quicker and potentially more valuable, more effective method of adding and incorporating new technologies.

However, investors seeking to use M&A to take advantage of the rapid pace of technological change in the insurance industry may be given pause for thought by the still uncertain regulatory environment surrounding AI.

Perhaps more than the stringency of any AI legislation, investors are likely to be put off by the lack of clarity surrounding regulation, with the Labour government still yet to set out specific policies for regulating AI.

In June 2025, it was revealed that proposed AI regulation had been delayed by at least a year as ministers sought to make the proposed bill more comprehensive than the originally planned legislation - a narrowly-drafted bill mainly focusing on large language models (LLMs) such as ChatGPT.

So far, all the Labour government has delivered is a number of vague references to committing to the safe development of AI technology, while ensuring that the overall approach remains pro-legislation.

With no concrete legislation in place, and no set date for when regulations will be introduced, AI users in the UK face an uncertain wait that may impact investor appetite. This is in contrast to the EU, where the EU AI Act came into force from August 1 2024, with further prohibitions coming into force this year and more obligations to be added in 2026.

The EU’s regulations, which include significant obligations, tight restrictions and potential non-compliance punishments such as fines of 7 per cent of annual turnover, not only give dealmakers more certainty in Europe, but highlight that UK regulations may be similarly tight.

While this is unlikely to impact the bulk of AI-related investment and dealmaking in the UK insurance sector, the lack of certainty over regulations may introduce an unwelcome aspect of risk for some.

After all, the 2021 National Security and Investment Act gave the government the power to call in some transactions that had been completed prior to the bill coming into force. Should the UK introduce more stringent AI regulations, then it is possible that the government will take a close look at investments and transactions completed during the past couple of years.

Could large consolidators be targeted in megadeals?
While most of 2025’s activity has tended towards the smaller end of the market, there has also been a higher percentage of larger transactions, indicating that buyers with the means to undertake major acquisitions are willing to do so.

A potential source for more future mega-deals is highlighted by Norton Rose Fulbright, who wrote that, despite the small potential buyer pool for consolidators who have expanded to become extremely large businesses over recent years, there is strong strategic interest in such firms. “The capacity to undertake these transactions is supported by the
impressive and consistent organic earnings growth at the largest brokers with some annual growth rates of over 20 percent.”

Further increasing the chances of mega-deals becoming more common during the remainder of 2025 and into 2026 is the moderation of valuations in recent months, providing a greater opportunity for strategic buyers to consider large transactions.

It’s not all been a tale of diminishing activity for the UK’s major brokerage consolidators. Just this summer, one of the sector’s most active buyers passed a major milestone and is showing no signs of tempering its M&A activity.

In early July 2025, insurance brokerage JMG Group announced the acquisition of London-based Profile Insurance Services, in a deal that represented its 50th acquisition since it underwent a management buyout (MBO) in 2020.

Founded in 1997 and initially providing cover for high-net-worth football players, Profile has expanded to become a respected broker, providing cover to a wide-ranging client base across the UK.

For JMG Group, the deal represented a continuation of an M&A strategy that has helped it expand to more than 800 staff working across close to 50 offices in England and Scotland. The acquisition also came shortly after the company secured a major new equity investment, jointly led by existing backer Synova, along with GTCR and the JMG leadership team.

The insurance sector has seen a major wave of consolidation over the past decade or so, with significant activity from both strategic buyers and private equity investors. In the broker market, especially, years of intense M&A seem to have brought the market to a point of maturity, from which activity is - perhaps inevitably - slowing.

However, this doesn’t necessarily mean that insurance sector M&A is set for a dramatic decline. More so, it appears that the market is simply in a transitional moment, with buyers assessing and, in some cases, adjusting their focus areas.

For some, this is leading to a greater onus being placed on integrating and growing previous acquisitions, for others it means exploring targets from different areas of the sector or in more fragmented international markets.

While the surge of activity seen during the past ten years may not return, the insurance sector still appears primed to see considerable levels of activity over the coming years, with numerous areas of the market still fragmented and factors such as technology and regulation driving transformations that could lead strategic buyers to respond through M&A.

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