Employee Benefits Firms Course Correct

Ten years ago, employee benefits (EB) brokers launched an arms race within their own industry.

It was sparked by the Affordable Care Act (ACA), which was signed into law in 2010 but didn’t gain traction until 2014. The most significant provisions of the ACA went into effect in that year, including creation of the health insurance marketplaces and employer mandates. Many of those mandates imposed new requirements on employers that offered group health plans, dramatically increasing their administrative burden, with potential penalties for noncompliance.

These changes disrupted the EB brokerage space, significantly expanding and complicating brokers’ roles. As clients’ needs and costs for employer-sponsored plans increased, EB brokers evolved from simply being transactional agents (providing rates and carrier costs to clients) to being true strategic consultants. Brokers had to help clients get creative on benefit plan design and funding sources to contain costs. They also needed to become experts in areas like ACA compliance and reporting, employee education, and enrollment technology.

The result was an expertise arms race as EB brokers invested in the tools, resources, and technologies needed to provide their clients with more services and greater value. Larger brokers and consultants were the first to deliver those additional services (i.e., data and analytics, pharmacy capabilities, HR consulting, ancillary benefit offerings, and more)—forcing regional and local firms to react accordingly. For a while, those with the most expertise and the most solutions won the day—taking business away from competitors and expanding wallet share with existing clients.

Fast-forward more than a decade to 2025—to an environment of rising costs for talent, tools, and resources—and employee benefits brokers (both standalone firms and EB divisions of property and casualty firms) face thinner profit margins, along with significant drops in sales velocity and organic growth since the end of the last decade. This is partially due to the fixed fee structures for benefits brokers, often based on fee per employee per month. But it is also due to the overall cost structure of trying to be everything for everybody.

This decline in profitability and organic growth may be part of the reason for the decline in acquisitions of stand-alone EB firms. Since the highwater mark in 2022 with 213 announced deals for EB firms, total deals dropped to 178 in 2023 and to 170 in 2024. In 2025, 13 deals had been announced through April.

Recently, the EB brokerage space has started to course correct. Firms are beginning to focus on (or specialize in) those areas they are best at—with the goal of driving better margins and stronger growth, and potentially ensuring their longevity.

It is a cautionary tale for the journey that commercial lines brokers are on today. Similar to where EB firms were 10 years ago, many commercial property and casualty brokers are aggressively building their firms (through partnerships and acquisitions) to gain advantages in expertise and service offerings. At some point, they may be risking an erosion on their margins due to the high costs of their over-investment strategy.

M&A Market Update

As of April 30, there were 196 announced insurance brokerage M&A transactions in the United States in 2025. Private capital-backed buyers accounted for 133 of the 196 deals (68%) through April. Independent agencies were buyers in 39 deals, representing 19.9% of the market. There have been four announced transactions by bank buyers in 2025. Deals involving specialty distributors as targets accounted for 31 transactions, about 16% of the total market, continuing the trend of low supply of specialty firms.

Ten buyers accounted for 48.0% of all announced transactions year to date, while the top three (BroadStreet Partners, Hub International, and King Risk Partners) accounted for 23.5% of the 196 transactions.

Notable Transactions

• April 11: BroadStreet Partners, a North American insurance brokerage specializing in middle-market P&C and employee benefits, is set to welcome a new investor group led by Ethos Capital, British Columbia Investment Management, and White Mountains Insurance Group. Ontario Teachers’ Pension Plan, the company’s majority shareholder since 2012, will retain a significant co-control stake and continue its strategic partnership. BroadStreet operates through a co-ownership model, with over 800 employees holding equity in their local agencies. The new partnership is expected to support BroadStreet’s long-term initiatives, including digital transformation and further expansion across North America.
• April 15: NSM Insurance Group has finalized the sale of its U.S. commercial insurance division to New Mountain Capital, a private equity firm managing over $55 billion in assets. The deal includes NSM’s portfolio of 15 specialized insurance programs across property and casualty, accident and health, and reinsurance, along with its retail agency, NSM Insurance Brokers. The sold division will operate under a new brand to be announced, with Aaron Miller, formerly NSM’s chief commercial lines officer, stepping in as CEO. NSM founders Geof and Bill McKernan will join the new entity’s board.