In Focus: Why are schemes brokers such attractive acquisition targets?

Following a slowdown of insurance sector acquisition deals in 2023, it is safe to say that UK M&A activity rebounded in 2024.

According to data from Ernst and Young (EY), published on 27 January 2025, the number of UK M&A transactions rose from 112 in 2023 to 188 in 2024, with the total publicly disclosed deal value increasing from £3.7bn to £4.6bn year-on-year.

This signals a steady increase from the 98 deals that were registered by EY in 2022.

The latest jump in UK M&A volume indicates a return of confidence across the market, after high interest rates and recessionary concerns affected M&A activity in recent years.

Among the firms which are acquisition targets are brokers that focus on schemes. Typically, schemes provide cover that is tailored to address the specific needs of a certain demographic – for example, protecting niche hobbies such as classic cars, or particular business trades and sectors.

These types of businesses are usually snapped up by larger brokers that are looking to expand their specialisms across different insurance markets.

Chris Withers, schemes and partnerships director at specialist insurer Ecclesiastical, told Insurance Times that schemes brokers “have something of real value” due to their access to underserved customers.

He added: “Those brokers that are looking to acquire will often target schemes brokers because of that specialism and because they have got this discreet customer.”

Withers also explained that specialist schemes brokers ”will be understanding the issue [the customer is facing], they would be moving in the circles in which those customers are moving and they will be scanning the challenges that are going to be coming”.

This makes schemes focused brokers attractive M&A targets because “the broker making the acquisition will be focused on all those areas,” Withers added.

Consolidation due to good growth?

Having access to niche markets also provides financial benefits.

According to the latest Insurance Times Schemes Index, published on 20 January 2025 and covering the period between 1 July and 1 December 2024, overall premiums earned by broker schemes increased 18% period-on-period.

The data further showed that the commission brokers earned from commercial combined schemes increased 33% year-on-year, equivalent to an uplift of £1.24m.

Simon Henderson, managing director for schemes and affinities at Jensten, said that good schemes brokers “will always be highly attractive to acquire”, especially because of their ability to grow organically and maintain a strength of brand.

Among the schemes brokers Jensten purchased in 2024 are Robert Gerrard and Co, a specialist in the lift and escalator industry, as well as Chris Knott Insurance Consultants, which focuses on niche motor schemes, particularly for classic cars and owners club vehicles.

Jensten also acquired Henry Seymour and Co, which provides schemes for salons, clinics, gyms, spas and mobile or freelance therapists via its Salon Gold proposition. It also services the trade and construction sector with its Tradesman Saver offering.

Henderson said: “A lot of schemes brokers have the ability to organically grow, probably beyond where normal market growth rates are.

“They are often market leading in brand as well. Other things that are attractive in [a] schemes business are retention rates – they are usually quite strong – and [schemes brokers] are often stable, high performing businesses.”

Henderson added that there could be more consolidation of schemes brokers on the cards for 2025, because while there are “very entrepreneurial people” running schemes brokers, “you get to a point in your life where you think it’s time to be part of a bigger group”.

Howard Lickens, executive chairman at The Clear Group, agreed that more consolidation of these types of firms was likely, adding that there are still schemes that “are fairly steam driven” and could, therefore, benefit from extra investment.

“There’s a lot of small ones out there that have done very well, but probably need to be invested in [with] some better tech,” he said.

This type of investment could help these small schemes to become ”more efficient”, ensuring ”they can use their data better”, Lickens continued.

“There is going to be a significant upside for the businesses that can invest in a few schemes.”

Acquisition plans

The Clear Group is also among the firms that were acquisitive during 2024. Over the course of that year, it completed 12 acquisitions to expand its capabilities through the addition of UK regions, specialist niches and MGAs to its portfolio.

Lickens, who has focused on M&A activity since The Clear Group was established in 2001, said it was key to make acquisitions in areas where “there is genuinely advantage to be had in being a specialist”.

He highlighted The Clear Group’s purchase of CoverMarque in November 2024 as an example. The firm specialises in insurance for temporary marquee structures.

“The schemes that we now have for that, they are not accessible to general brokers,” he added.

“So, you’re in an area where there’s a real advantage to being knowledgeable.”

After joining The Clear Group, CoverMarque managing director and founder Nick Drew said that “it’s particularly important that we continue to offer our clients the exceptional service and innovative solutions that have been the foundations of our success to date”.

He continued: “The Clear Group has an outstanding reputation for backing specialist businesses, so we are delighted that we have found the ideal partner for CoverMarque.”

Lickens said that after acquiring a schemes broker, it was important to “retain the reason that they succeed” in order to make the partnership work.

“Consolidators can’t be so arrogant and say, for example, ‘aren’t they lucky, they’re going to get the Clear seal of approval – we’ll sprinkle a little bit of magic dust and all will be well’,” he said.

“We’ve looked at a number of equine brokers over the years, but I’ve never ridden a horse. I know nothing about horses and the people who run those schemes, they know everyone in the market, they understand and love horses.

“So, there’s more to this – it is not just a matter of arithmetic.

“You need to respect what you’re acquiring and there’s often a relationship at the heart of it that is central to us.”

Henderson added: “You don’t want to alter what’s making [schemes brokers] really good and what’s making them highly competitive.

“You want the cultures to align and all of the things that make it good, you want to retain.”