AJG causes consolidation in UK market
The large number of acquisitions made by Arthur J. Gallagher in recent years has partly driven rapid consolidation in the UK commercial lines broking market. But it remains less concentrated than the French and Italian markets.
This is the finding of new research published by Finaccord concerning four of Europe's largest markets for commercial non-life insurance broking.
It found that the UK market is consolidating most rapidly, in part as a result of the multiple acquisitions made by AJG in recent times. However, the degree of concentration reached in the UK remains behind that of France and Italy although it is now well ahead of the still-fragmented German commercial non-life insurance broking sector.
The Italian market displayed the highest degree of concentration in commercial non-life insurance broking of the four countries. The top ten brokers in Italy accounted for 77.6 percent of all commercial non-life insurance broking revenues in that country in 2013, followed by France with 71 percent.
Despite the equivalent figure for the UK being lower, at 61.9 percent, it has increased from 52 percent in 2011 and will rise further by the end of this year as a result of acquisitions that have taken place during 2014, said the market research company.
The top ten competitors in Germany accounted for 46.1 percent of commercial non-life insurance broking revenues in 2013, a figure slightly down from 47.6 percent in 2011. Finaccord reported that the German market is likely to offer considerable long-term potential for consolidation.
"The most acquisitive broking group in the UK in recent times has been Arthur J. Gallagher as it bought Heath Lambert and several smaller brokers in 2011, the property and commercial insurance interests of Barbon Insurance Group in May 2013, both Belmont International and Giles Insurance Brokers in September 2013, and both OAMPS and The Oval Group in April 2014,” said Bernd Bergmann, a consultant for Finaccord.
"These acquisitions have transformed Arthur J. Gallagher's position and our analysis suggests that they potentially enable it to challenge the established leadership of Aon and Marsh in the UK in future.”
As part of its series of reports about commercial non-life insurance brokers in Europe, Finaccord estimates that with revenues of €2.88 billion the UK hosted the largest market broking of commercial non-life insurance in Europe in 2013 and that the top ten UK brokers accounted for about €1.78 billion of this total in fees and commissions.
The report found that the UK was followed by the French market and then by that of Germany which has a lower value because the distribution share of brokers in commercial lines there is substantially less than in either France or the UK (due mainly to the enduring strength of agents and captive brokers).
“While the market for commercial non-life insurance broking in Germany is growing, independent brokers have often had difficulty in accessing the market for some of the large corporate accounts which are served by captive brokers. At the other end of the spectrum, small businesses frequently still use agents.
“This market structure makes it more difficult for independent brokers to grow and for the large international brokers to identify significant acquisition targets. Nevertheless, it is reasonable to expect that it will consolidate in future, especially given the comparisons that can be made with France, Italy and the UK,” said Bergmann.
