For the fourth year in a row significant M&A means our annual Top 10 Reinsurance Broker Rankings feature a series of pro forma estimates and a line-up based on 2021/22 revenues that will look different when we revisit the exercise this time next year.
Guy Carpenter parent Marsh McLennan’s $5.6bn acquisition of JLT announced in 2018 and closed in the spring of 2019; Aon’s long and unsuccessful pursuit of Willis Towers Watson through 2020 and 2021; the subsequent $3.25bn+ acquisition of Willis Re by Arthur J Gallagher that closed last December; and now Howden’s ambitious $1.6bn move for TigerRisk, which is expected to close in early 2023.
The rampant pursuit of scale in the sector means that even with a relatively small number of players the deals have kept coming.
And because we have made it our approach to include pro forma estimates for announced but not consummated transactions, that makes for plenty of caveats and wonky prior-year comparisons.
In a sense though, the final standings in our latest Top 10 Reinsurance Broker Rankings represent no real change in the global order, with the top three firms holding their positions – as legacy Willis Re accounts for the lion’s share of pro forma Gallagher Re revenues based on 2021 estimates by this publication.
That means that Aon, Guy Carpenter and now Gallagher Re continue to unequivocally call the shots of the global brokered reinsurance market.
However, the 2021 revenue figures compiled in our latest survey show small and mid-size rivals are wasting no time in carving a place for themselves in the current hardening market, with significant uplift at several firms driven by strong organic growth and strategic build-outs.
For much of 2020 and 2021 (the year we are surveying) the Aon-WTW deal appeared as if it would be the defining transaction of the global insurance broking market.
The proposed deal looked set to disrupt a status quo that had seen the big three global brokers reign supreme for an extended period of time, giving way to a duel between a JLT-expanded Marsh McLennan and its former second contender.
For the global brokered reinsurance market in particular, the idea of a combination between Aon’s Reinsurance Solutions and Willis Re was also transformative as it would create a new indisputable leader, opening a big gap on Guy Carpenter in second place.
That possibility, of course, did not last long as both US and European competition regulators quickly pushed for the divestment of the WTW reinsurance broking business, with Gallagher coming onto the scene in May 2021.
Two months later, the termination of the deal between Aon and WTW – by grace of the US Department of Justice – sent shockwaves across the insurance world and left Willis Re in an uncomfortable limbo, until the Gallagher deal was revived as a standalone acquisition.
Ultimately, the outcome within the global brokered reinsurance market ended up being very similar, with the reverse merger of erstwhile second-tier player Gallagher Re into the much larger Willis Re placing the combined business among the dominant triad of global reinsurance brokers.
Gallagher completed the acquisition of Willis Re on 1 December 2021 and some observers may have predicted a calming in M&A activity after the long-running saga.
But then in May this year came the announcement of the proposed $1.6bn combination of Howden RE and TigerRisk.
The transaction will be transformative for both parties, cementing the position of the combined Howden Tiger entity as the industry‘s fourth-largest global reinsurance intermediary.
And so our Top 10 Reinsurance Broker Rankings – now in its fourth year – will likely change meaningfully by the time of the next survey, as it has done every previous year.
But how does the picture look for 2021/22 and what does it tell us about the direction of travel for the sector?
For the purposes of our updated Top 10 Reinsurance Broker Rankings table, we have decided to present all Willis Re and Gallagher Re past year pro forma revenues separately, which provides a better picture of their relative weights prior to last year’s combination.
There are also a few other caveats around the historical figures for the top three players that are worth mentioning.
We have used the $745mn 2020 pro forma revenue number for the acquired Willis Re business referenced by Gallagher in its investor presentation when the deal was announced last year.
Our 2019 and 2018 numbers for Willis Re were both estimates, with the 2019 estimate including $350mn of facultative business not included in the sale to Gallagher, while the 2018 number did not include fac but did include Miller.
As for Guy Carpenter, although Marsh McLennan’s acquisition of JLT only closed at the start of the second quarter of 2019, we have used reinstated 10-K revenue figures provided by Guy Carpenter’s parent that factor in JLT Re turnover as if the firm had been acquired at 1 January 2018 for full prior-year comparisons.
A view from the summit
As shown by the results of our survey, Aon’s Reinsurance Solutions continues to lead the rankings.
The unit grew overall revenues by 10 percent in 2021, and reported 8 percent organic growth as it benefited from strong growth in treaty, as well as solid growth in facultative placements and capital markets transactions.
Rival Guy Carpenter also grew revenues by 10 percent in 2021 but reported higher organic growth than Aon’s Reinsurance Solutions.
With its aggressive hiring strategy over the last two years finally bearing fruit, it recorded 9 percent organic growth for 2021, outpacing its largest rival in three of the four quarters of the year.
Meanwhile Gallagher Re, which officially completed the acquisition of Willis Re on 1 December, is estimated to have delivered revenues of $925mn for the year, reaching roughly half the size of the two main sector players.
The combined business also reportedly managed similar revenue growth of around 10 percent, despite the challenges of the integration.
In its latest market update, Gallagher’s chairman, president and CEO Pat Gallagher delivered a positive note about the acquisition, saying progress was “right on target”.
The rise of the challengers
The rising tide of the hard market for commercial insurance has swollen premium volumes coming through proportional, or quota share, treaties – which in turn feeds increasing commission revenue for reinsurance brokers.
The last three years have also seen strong demand for facultative reinsurance, providing another source of revenue growth for reinsurance brokers that include fac operations.
These dynamics have also proved to be strong drivers of growth at several of the small to mid-size reinsurance brokers.
Six of the seven firms below Gallagher Re in our rankings delivered double-digit revenue growth in 2021 as their aggressive hiring strategies translated to new business wins and additional opportunities from their expanded capabilities.
TigerRisk, soon to be combined under the Howden Tiger banner, saw solid 2021 growth of 29 percent, based on our estimated revenue numbers.
The firm’s growth momentum was driven by an active hiring strategy and build-out across the business bearing fruit.
Strong capital market revenues and legacy deal flow, as well as synergies between reinsurance, capital markets and TigerRisk’s strategic advisory businesses, were also understood to be contributing factors.
The combination with Howden RE will cement the position of the new Howden Tiger as the fourth-largest reinsurance broker.
On a pro forma basis, the combined business would have achieved revenues of around $300mn in 2021 – or over $350mn if Howden-owned Lloyd’s broker Bowood’s revenues are also included.
Indeed, turnover figures estimated for Howden RE (which includes reinsurance business placed by Howden Specialty) are presented this year both with and without Bowood revenues.
A like-for-like comparison excluding Bowood suggests an impressive growth rate of over 60 percent, which sources have attributed to the expansion of London market specialty treaty, MGA and fac as well as international office growth.
Lockton Re is the other growth story of 2021, with our estimates placing revenues at around $155mn, up 78 percent on the previous year.
Although the Tim Gardner-led firm would not confirm the 2021 revenue number, a spokesperson said that Lockton Re’s “impressive growth over the last 12 months has been predominantly a result of the phenomenal success the business has seen with treaty clients”.
The business is now operating from 15 locations globally with nearly 300 staff and continues to see expansion with large global clients as well as with regional clients, Lloyd’s syndicates and specialist companies.
The spokesperson also highlighted the continuous development of Lockton Re’s proprietary analytics platform SAGE.
Acrisure and BMS press ahead
Acrisure Re is also thought to have maintained strong momentum in 2021.
The firm is understood to have grown by 25 percent in 2021, with most of the expansion coming from North America as well as from London wholesale business.
Strong growth in programs and in the insurtech space were also seen as contributing factors.
Last year also saw the successful launch of the Acrisure Re Capital Advisory Solutions business, which is understood to have boosted 2021 top line figures.
Meanwhile BMS Re held on to eighth place in this year’s rankings, delivering 19 percent revenue growth.
According to our estimates, which now include Trean since 2020, the firm produced $113mn in revenue in 2021.
Sources said the continued flow of business to the E&S space from admitted paper has resulted in significant growth in programs, which drove demand for commercial primary and excess casualty placements by the firm, including E&O, D&O, facultative and professional liability as well as captive and risk retention group covers.
BMS Re’s facultative team is thought to have delivered significant property and casualty capacity to stressed areas of the market to fill gaps in treaties placed by competitors, while its property treaty team placed quota share, aggregate, per risk, structured and cat capacity for its clients as they saw strong underlying growth in the hard market.
UIB and Holborn
UIB retained the ninth position it had achieved in our rankings last year as it generated what the firm describes as “group reinsurance revenues” of $95mn.
Meanwhile Holborn clinched last place in our top 10, reporting 7.2 percent revenue growth in 2021.
The New York-based firm reported a $50.4mn figure on a net brokerage basis and exclusive of income from consulting, interest or other income, in contrast with some of the other firms in our survey.
As we reported last year, there are significant differences in the way companies report reinsurance revenues, with some participants contending that certain figures provided to this publication do not correlate with the definition of “pure cedant-based reinsurance” that others are reporting.