NU Online News Service, June 14, 3:02 p.m. EDT

Brokers will likely benefit from the uncertain future for U.S. healthcare reforms as demand for brokers’ services should increase, according to Moody’s Investors Service.

In a report on the state of global-insurance brokers, Moody’s says that with U.S. healthcare insurance in flux, the employee benefit products and services insurance brokers provide will be more in demand by clients as healthcare is expected to remain employer based.

The report’s assertions back up comments in May by J. Patrick Gallagher, chairman, president and chief executive officer of Arthur J. Gallagher, who said that, as bad as he believes the new health-care law is, it is providing opportunities for his firm.

“I’ve never seen such a selling environment,” Gallagher said at the time, noting that new clients are seeking brokers capable of dealing with the new law. “That business is on fire and continues to be.”

However, the increased business for larger brokers comes at the expense of smaller ones, which are unable to keep up with compliance issues and do not have the resources to keep up, Gallagher said.

Regarding Moody’s outlook on global-insurance brokers overall, the report says they have weathered recent economic turmoil and have exhibited steady performance through the soft market, leading Moody’s to give the sector a stable outlook.

Moody’s says it recognizes that the firms continue to have challenges concerning integration of acquired firms and maturity of debt for leveraged brokers.

However, business is expected to improve along with modest economic recovery through this year and next, with real economic growth put at 3 percent this year, and rising to 3.5 percent next year for the G-20 countries.

The report says the firming property and casualty market is giving brokers a boost in revenue as insurers seek to improve their profitability with rate increases. The combination of these rate increases and the improving economy expanding business opportunities should support single digit organic revenue growth for the brokerage firms.

Moody’s says that “most rated brokers have dedicated merger and acquisition teams” to work on acquisitions. This sector is ripe for consolidation, the report says, and acquisition activity will continue to fuel growth.

Of the 10 global insurance brokers Moody’s rates, all have stable outlook except Towergate Holdings II Ltd. with a negative rating outlook.

The rating service rates the major public brokers, Marsh & McLennan Companies, Aon plc and Willis Group Holdings. All three are in the “Baa” range.

Among the privately held brokers, Moody’s rates Hub International, USI Holdings Corp., Alliant Holdings, AmWINS Group, Inc., and HMSC Corp. All of these brokers are in the “B” range.

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Moody&rsquo;s: Uncertain Future for U.S. Healthcare Law Benefits Brokers

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