NU Online News Service, Feb. 1, 3:09 p.m.EST

Insurance broker revenues are expected to grow modestly thisyear as the soft market and the fallout from the economic crisiscontinue to put a damper on earnings, according to a report fromFitch Ratings.

In its “2011 Outlook: U.S. Insurance Broker Industry,” Fitchsaid “competitive fundamentals” within the property and casualtyinsurance market coupled with limited demand for broker servicesfrom the economic crisis will be the primary drivers affectingbrokers’ earnings in 2011.

A modest growth in earnings is expected over the next 12 monthsdespite the soft market, Fitch said, but organic growth will remaina challenge.

Additionally, Fitch said non-organic growth through acquisitions“will be constrained” from a shrinking supply of acquisitiontargets. However, Fitch said it expects overall revenue growth tocontinue to be driven by mergers and acquisitions.

Fitch noted that acquisition activity picked up in 2010 comparedto 2009. The strong track record of the major brokerage firms tointegrate acquisitions will override concerns regarding integrationrisk and goodwill impairments, Fitch said.

With the lifting of the ban on contingent commissions among themajor brokers, Fitch said it believes the major brokers will pursuesmaller acquisition targets that accept that kind ofcommission.

The overall industry outlook for brokers was placed at stable.Fitch said a “near-term shift to a positive industry ratingoutlook” was unlikely.

Of the five major public insurance brokers Fitch examined, onlyAon is expected to see an increase in earnings, due to itsacquisition of human resource outsourcing firm Hewitt.