The Race for Consolidation: How the rules of the game are changing for German insurance brokers

February 22nd, 2023

The Race for Consolidation: How the rules of the game are changing for German insurance brokers

The German insurance market is one of the largest and most developed in Europe and has demonstrated continued stability despite the shapeshifting of the global economy. Leviathan household names – Allianz, Munich Re, Talanx – loom alongside a growing insur-tech market valued in excess of $200B. Against this backdrop, it is unsurprising that 19% of European insur-tech businesses are based in Germany (Pinset Masons). The story of German digital insurer WeFox, which recently extended its Series D funding to reach a colossal $455m, illustrates the appetite for innovation, as entrepreneurs seek to disrupt the traditional insurance value chain. 

The emergence of new models in the market has brought the role of the insurance broker into sharp relief. What’s more, the wave of consolidation in the UK insurance brokerage market has provided a stark contrast with the historically fragmented and localised players in Germany. However, the tide is beginning to change, and competing German brokers - propelled by a new rush of private equity investment - are joining forces at an unprecedented rate. The international titans of the market such as Marsh and AON have certainly played their part in the race for consolidation, but they have faced increasing competition from private equity-backed rivals such as Gossler Gobert & Wolters (backed by HG Capital) and MRH Trowe (backed by AnaCap). In fact, Oliver Wyman predicts that by 2025, approximately 100,000 of the 245,000 insurance intermediaries registered in 2014 - of which roughly 45,000 are brokers - will have left the market: either subsumed by larger players or wiped out entirely by new, digital platforms.

What, then, are the conditions that have allowed German mid-sized brokers to reach such significance? Moreover, what is the opportunity for private equity investors to capitalize on this growth? By discussing the current dynamics with Oliver Lang (former CEO, WeFox Insurance) and Matthias Hansen (former COO, Fonds Finanz & former CEO, SmartInsurTech), we can draw several conclusions. 

Digitalisation – Sink or Swim

The rise of insur-techs has been both disarming and motivating for conventional brokers, forcing them to innovate. In 2017, McKinsey described the insur-tech as “the threat that inspires”, and such an observation is no less shrewd today. Matthias Hansen, who spent several years on the executive committee of SmartInsurTech and top-10 broker Fonds Finanz remarked:

“Insur-techs will continue to enhance customer experience, introducing new products at the point of sale or product-oriented stage of the value chain. But more importantly, insur-techs will move deeper into the value chain of insurers, driving the digital transformation and streamlining of processes. In 2023, we will see insur-techs automating manual processes and reducing operational costs through the use of technology, making insurance more accessible and affordable for consumers.”

As the insur-tech model continues to obfuscate the clear-cut boundaries of the insurance value chain, traditional brokers will be forced to reassert their place in the ecosystem. This shift will be particularly pronounced in Germany, where market share has been inextricably linked to tenure and gravitas. Indeed, the two largest national commercial brokers – Ecclesia and Funk Gruppe – have been operating for over a century (their origins date back to 1909 and 1879 respectively). Undeniably, as insur-techs continue to push the envelope, now is not the time for these market leaders to rest on their laurels. Hansen echoes this sentiment, highlighting that market fragmentation and digital immaturity have been two sides of the same coin:

“The German insurance brokerage market has been less affected by technology advancements and digitalisation than the UK market, so many businesses may not have seen the same level of pressure to consolidate. In addition, several players in Germany are still led by owner-founders from a different generation, who perhaps hope that others will reinvest time and money into the digitalisation of their businesses. But the time for digitalisation is now.”

Unsurprisingly, then, the brokers led by young, digitally native leadership teams have grown rapidly via aggressive inorganic growth, having formed successful alliances with private equity investors. Take the trailblazing commercial broker MRH Trowe, for example, whose senior leaders climbed the ranks of EY and completed bachelor's degrees in entrepreneurship before pivoting to the insurance sector. It is undoubtedly in part thanks to their forward-thinking approach and digital receptivity that, just last month, the business completed its 21st bolt-on acquisition since receiving investment from AnaCap in October 2020.

Macroeconomic Pressures & the Predicament of the Large Multinationals 

International giants such as Marsh, AON, and Howden (backed by General Atlantic and HG Capital) have played an important role in the race for consolidation, and large swathes of the German insurance brokerage market have been subsumed under their brands. 2023 will be a critical juncture for these players who, up until recent years, have been buoyed by a stable national economy and recurring revenues. Oliver Lang – serial entrepreneur, founder, and the former CEO of German insur-tech WeFox Insurance – believes that the multinationals will be forced to contend with a host of challenges:

“This year, market leaders will be guiding their customers through a period of price increases (due to higher natural catastrophe risks but mainly due to inflation), stricter underwriting and risk accepting in cyber or D&O, less favourable terms and conditions, and lower capacity in some lines of business. The times of good news for their customers are over.”

In response to these macroeconomic pressures and the increasing competition from more agile medium-sized brokers, consolidation will continue to be the order of the day for the international titans. However, this strategy alone cannot act as a proxy for adapting to an increasingly innovative market and may even represent something of a Catch-22. As Matthias Hansen observes;

“Market leaders will face further challenges in effectively managing the acquisitions they have made or plan to make in order to realize the economies of scale they aim to achieve.”

Indeed, the rapid and successive integration of small brokers may be costly for the larger players. In an unfavourable economic environment where customer experience is more important than ever, medium-sized brokers with robust customer linkages and streamlined processes may be structurally more capable of weathering the storm.

A bright future for investors backing German insurance brokers?

Oliver Lang and Matthias Hansen are unanimous in their optimism for private equity investors forming partnerships with German insurance brokers. Lang reflects:

“Insurance distribution companies have produced significantly higher total shareholder returns than insurance or reinsurance companies throughout the past 15 years. They are a great target for private equity investors, as the trend is their friend. Some investors have made a fortune by consolidating insurance distribution markets in the US, UK or the Netherlands. Germany is a big insurance market, so investors are beginning to use proven models and apply them to the German market.”

What’s more, within commercial lines, there are still several independent brokers that have reached an impressive degree of scale without any private equity backing – take for example Südvers or Artus Gruppe – and it is these players that investors should also be scrutinizing. This year, the German insurance brokerage market is poised to welcome large-cap funds into its growing club of global investors. What is clear is that the rules of the game are certainly shifting, and those wed to traditional modus operandi will struggle to stay afloat.

Read the full interviews with Matthias Hansen and Oliver Lang here: The Race for Consolidation: German Insurance Brokerage


Matthias Hansen has held senior executive positions in insurance, broker syndicate, consulting, and software/technology firms across the German market. He is the former COO of one of Germany’s largest insurance brokers, Fonds Finanz, and the former CEO of leading insur-tech SmartInsurtech. In 2022 alone he conducted 18 advisory projects for investors – namely, private equity & pension funds and family offices.

Oliver Lang is a serial entrepreneur with special expertise in insurance, banking and other financial industry segments. He combines innovative thinking and business-building competencies with extensive strategic experience gained at McKinsey, and first-hand knowledge of corporate players. During his tenure at leading insur-tech WeFox, he led a series of acquisitions of small and medium-sized brokers across the Netherlands, Italy and Germany. 

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