Early in my insurance career, I was advised to pay close attention to the reinsurance market, the place where insurance companies go to insure their own balance sheets. That advice has proven particularly relevant following one of the longest and most challenging hard markets the industry has faced in recent history. After several years of rate-driven premium growth, the market is now showing clear signs of softening. Carriers and other capital providers are accumulating excess capital and competing for risk. Strong industry returns in 2025, combined with relatively benign catastrophe losses, have accelerated this shift.
A softening market has direct and often underappreciated implications for agency valuation. Because most agencies earn a fixed commission percentage on premium, downward pressure on rates can quickly translate into slower or even declining revenue growth. At the same time, agencies are managing fixed costs such as service labor, occupancy and technology that do not contract simply because premium volume does. The result is margin compression, reduced cash flow and greater earnings volatility, all factors that buyers scrutinize closely when valuing an agency.
In an M&A environment, this dynamic can lead to lower valuation multiples, increased use of earnouts, or more conservative deal structures, particularly for agencies without a clear plan for sustainable growth and leadership continuity.
Proactive, not reactive
These valuation pressures are precisely why soft markets tend to expose weaknesses in succession planning. When cash flow tightens, agencies that rely heavily on a single owner, lack operational depth, or depend on premium-driven growth often struggle to execute a clean internal or external transition. At SIAA – The Agent Alliance, we’ve assisted countless agents in their succession planning process, and we see two common mistakes agencies make in their approach:
Read the full article, written by Sean Kenny, Executive Vice President of Corporate Development, SIAA – The Agent Alliance, Reprinted with permission from the July 23, 2026, issue of Property Casualty 360. Further duplication without permission is prohibited. All rights reserved