Global insurance brokers 2021 outlook stable, says Moody's

Insurance brokers will maintain fairly stable EBITDA margins and debt-to-EBITDA ratios despite the COVID-19 pandemic and economic disruptions of 2020, suggests a new report by Moody's.

According to the report, the 2021 outlook for global insurance brokers remains stable, which Moody's says reflects the nascent economic recovery and the industry's sound business model.

Moody's report found that insurance brokers are increasingly active in the credit markets, with over $75 billion of rated debt and equivalents outstanding.

In 2020, brokers have issued more than $25 billion of new, add-on and replacement debts and credit facilities, helping them lower their borrowing rates, extend debt maturities, boost liquidity and fund acquisitions.

Furthermore, insurance brokers also increased their acquisition pace in the second half of 2020 after a pause in the second quarter. Moody's noted that private equity is a catalyst to drive further consolidation along with readily available debt financing and low market interest rates.

Bruce Ballentine, Moody's vice president, explained: "Insurance brokers can navigate economic uncertainty based on their good value proposition, partly variable cost structure, low capital expenditures and healthy cash flow.

"The brokers implemented cost-saving measures as the coronavirus pandemic took hold. They shifted to remote work, reduced discretionary spending, postponed nonessential capital expenditures, and slowed the pace of acquisitions, helping stabilize their earnings and free cash flow."