Brokers will likely benefit from the uncertainty surrounding U.S. health-care reforms as companies seek their counsel over the new insurance requirements, according to Moody's Investors Service.
In a new report on the state of global insurance brokers, Moody's says that with U.S. health-care insurance in flux, the Employee Benefit products and services insurance brokers provide will increase in demand as health care is expected to remain employer-based.
The report's assertions back up comments in May by Arthur J. Gallagher Chairman, President and CEO J. Patrick 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, noting that new clients are seeking brokers capable of explaining the new law. "That business is on fire and continues to be."
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 the agency to give the sector a stable outlook.
Moody's says it recognizes that brokerages continue to face such challenges as the integration of acquired firms and maturity of debt for leveraged brokers. Business is expected to improve along with modest economic recovery through this year and next, the report adds, 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 P&C market is giving brokers a boost in revenue as insurers seek to improve their profitability with rate increases. The combination of those slightly higher rates and the slowly improving economy should support single-digit organic revenue growth for brokerage firms.
Moody's rates the major public brokers, among them Marsh & McLennan Cos., Aon and Willis Group Holdings. All three are in the "Baa" range, indicating they are subject to moderate risk.
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, meaning they are subject to high credit risk.
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