State of Valuations
How A Shifting Rate Cycle May Reshape Insurance Broker Valuations
For the past several years the insurance brokerage industry enjoyed an economic environment which created a tailwind for strong revenue and organic growth. This in turn supported elevated M&A activity and valuation multiples, especially for platform firms.
Now, as market conditions continue to soften – with premium rate increases slowing (or even decreasing) across most P&C insurance lines – brokers are faced with the prospect of demonstrating their value on more than rate-driven organic growth.
For buyers, a softer rate environment translates into more conservative evaluations on the future performance of prospective targets. Buyers may also lean on the use of earn-outs and performance-based structures as they look to mitigate their risk by tying a portion of consideration to revenue or EBITDA targets.
The impact on broker valuations may be more nuanced. Multiples for smaller roll-in and tuck-in deals – already under pressure – may soften further, despite their continued attraction from arbitrage-driven accretion. But as inflation continues to stabilize and if interest rates decline further, the larger strategic brokers (most PE-backed or public) will no longer be able to depend on the organic growth that they’ve enjoyed over the past several years, or the high fixed rate income from investments. The result will likely be even more demand for acquisitive growth, putting even more upward pressure on valuations as supply remains limited. Those larger platform firms with diversified revenue streams and specialty capabilities should remain resilient against valuation drops.
Valuations remain strong for high performing firms
Even with a shifting economic environment and all signs pointing towards a softening market, overall firm average and platform valuations in 2025 were able to maintain record levels.
Valuations as a multiple of EBITDA (earnings before interest, taxes, depreciation & amortization) on an upfront base purchase price ending Q4 2025 averaged 11.50x across all firms, with a potential total enterprise value up to 15.48x when achieving the maximum earnout. Platform firm valuation multiples ending Q4 2025 averaged 14.34x on an upfront base purchase price, with a potential total enterprise value up to 18.41x when achieving the maximum earnout.
Despite these record multiples, expect continued pressure on valuations for firms who are not able to generate organic growth outside of rate or exposure base expansion. Firms who are able to generate sales velocity in the mid to high teens should still command aggressive valuations as the buyers are continuing to look for ways to enhance their own organic growth metrics.
How important is organic growth to platform firm valuations?
Platform firms (which are typically larger firms, with brand recognition, seasoned professionals and are built within a scalable infrastructure) have historically outperformed the smaller agencies and overall average for valuations multiples. Much of this has to do with scale and the ability to demonstrate future profitability and growth.
However, as market conditions have begun to shift, there has been an even greater separation at the top of the platform scale between those firms that are able to deliver greater organic growth.
For the past two years, firms that have fetched the highest base purchase price multiple (the top 25% of platform firms) have significantly outperformed their platform peers in organic growth rate.
While organic growth for everyone dropped in 2025 – the gap between the top 25% of platform firms and the “all platform firms” widened, year-overyear. The difference in 2024 was 3.97%, while the difference in 2025 was 5.35%. Now, more than ever, the importance of real organic growth for those firms looking for partnerships or outright sale becomes most obvious.
Despite these record multiples, expect continued pressure on valuations for firms who are not able to generate organic growth outside of rate or exposure base expansion. Firms who are able to generate sales velocity in the mid to high teens should still command aggressive valuations as the buyers are continuing to look for ways to enhance their own organic growth metrics.
Public Broker Values Take The First Hits
In the shadow of the softening rate environment, the public insurance brokers were the first to see cracks in the armor of a traditionally bullet proof industry in the form of their equity values.
Since collectively peaking at the end of March 2025, public brokers watched their values go from historic highs to a sudden fall, dropping collectively by 21% since March (through 12/31/25) and down 10.2% overall in 2025 as calculated by the MarshBerry Broker Composite Index. This decline is mostly glaring in light of the positive performance of the broader equity benchmarks, where the S&P 500 and the Dow Jones Industrial Average ended 2025 up 16.4% and 13.0% respectively.
This rise in value for the public brokers over the past few years has been driven in part by some megadeal announcements, but also in part by extraordinary organic growth during this historically long hard market. Consistent double digit organic growth has been buoyed by rising insurance premiums (partially supported by years of global inflation). Growth focused investors have seen this, and invested heavily in this sector, riding the wave of growth.
However, now that inflation has moderated and interest rates are declining, the insurance market is transitioning from a prolonged hard rate cycle to a cycle where rate growth has entered a softening phase.
Potential Impact On The PE-Backed And Independent Broker Valuations
There is a convenient rationalization by some buyers, suggesting that this drop in share value by public brokers will or should create downward pressure on the value of privately held brokerages. But the fact is, historically, this trend rarely holds true.
In 2024, public broker valuation multiples spiked, reaching 20x EBITDA. Yet the private platforms valuation multiples held at elevated levels without spiking in suit. As public values came back down in 2025, private broker valuations continued to maintain their elevated valuations – even rising in 2025 to record levels – and are expected to maintain course, with top performing platform continuing to fetch record high multiples.
It is MarshBerry’s belief that valuations will continue to be influenced by limited supply vs. high demand. Now, as interest rates drop, the expectation is that with more affordable capital, compounded by the pressure to generate revenue to replace slowing organic growth – acquisition strategies and demand will increase even further.
Outlook for valuations in 2026
Many believe that insurance brokerage M&A volume in 2026 should continue to build momentum and even outperform 2025. However, regardless of deal volume – valuations are expected to remain at elevated levels – or perhaps go even higher.
Here are a few factors that will continue to influence those valuations:
- Cost of capital. While the higher cost of capital over the past two years didn’t appear to negatively impact valuations (unless the impact was in keeping values from rising significantly further), any further cuts to interest rates should help deal volumes and values. If rates were to rise again, the impact may be on final earnout values and less on base purchase price multiples.
- Size of buyer pool. As more private capital investors enter the game, the demand for firms will increase, creating more upward pressure on values. However, the trend of big buyers buying other big buyers (consolidating the consolidators) could also have the effect of taking buyers off the board.
- Size of seller pool. The competitive nature of this industry is forcing many owners to make decisions about the future of their firms. Whether that be taking on a minority partner or selling outright. Year after year, the number of firms sold increases. Will we eventually see the end of the independent broker? Doubtful. For every firm that sells, there’s a new brokerage that pops up. Business owners and entrepreneurs are the lifeblood of business continuity.
- Addition of more public brokers. If one or more of the larger private firms decides to go public in 2026, there could be a ripple effect on valuations for large PE-backed brokers. Because investors are going to see another exit opportunity in the form of an IPO, as opposed to a recap or a sale to another strategic or public firm.
- Quality of firms. Quality firms are being highly rewarded today, even more than in the past. How firms are growing, the quality of that growth and their leadership capabilities (not just top tier, but the next generation of leaders) is going to become even more important, now that the insurance rate cycle is shifting.
The good news is that regardless of what happens to valuations in this industry, MarshBerry firmly believes that insurance brokerage is the greatest industry in the history of mankind. And the real reason for the rapid rise in insurance brokerage values is that the world now knows it, too.
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