Consolidation will determine the order of the Top 50 next year, and age will be the deciding factor in which companies will be swallowed up Jonathan Russell reports.
Consolidation, regulation and depreciation are the three juggling balls that brokers must try to keep in the air if they are to keep their spot in the Top 50 Brokers next year.
But there is nothing new in this. A slow trickle of merger and acquisition deals has been keeping the consolidation market ticking over for the past two or three years. FSA regulation has been prowling around for well over a year and, for many, has turned out to be more of a sheep in wolf's clothing than vice-versa.
And depending on who you listen to, premium depreciation, or the soft market has been with us for over 12 months now. So what's new, and what will emerge to be the dominant force that drives the market forward?
IMAS principal James Simpson said: "All the way along we have never been a believer in regulation as a big driver towards consolidation. The biggest factor is still, and will continue to be, age.
"Where we see the most movement is in the Nos 15 to 35 range, where it represents a mix of organic and acquisition growth. Oval, Folgate, and Country Mutual have been, and should continue to be, acquisitive, while RK Harrison, United, RFIB and BDML are growing organically."
This is one of the startling things to emerge from this year's Top 50, not one change in the top 15 companies. It almost feels like the calm before the storm.
One of the factors that could seriously affect the market is renewed interest among venture capitalists for broker acquisition. The AA, Saga, Smart and Cook and Oval have all seen interest or input from venture capitalists - a factor that Stuart Reid of Stuart Alexander sees as crucial for the next 12 months.
He says: "The super provincials are now being broken into two groups.
Companies like Oval and Smart and Cook with venture capital backing, and the independent companies. What remains to be seen is the hunger for the venture capital backed companies or within the independents.
"The companies with the most potential for growth are the likes of Smart and Cook, The Broker Network, Alec Finch, Giles, Folgate and Oval."
In the personal lines sector the demise of Hill House Hammond should have a knock-on effect throughout the market, as what is left of the high street market scrambles to pick up the orphaned clients. That, coupled with uncertainty over the future direction of the AA, could open the door to major opportunity.
Simpson said: "The AA had a very flat year and it is difficult to know what will change to make any material difference. It has not been performing well and needs to approach its business from a different angle. If the venture capitalists that took them over decide some else can do a better job anything can happen."
But what of individual brokers and their strategy for climbing up the table next year? Simpson warns that to break into the elite club the nearest contenders will need to grow by about 40% over the next 12 months - no mean feat in a softening market.
Sterling Hamilton Wright director of agency management and marketing Steven Duffy said: "The market is a bit flat, but we see it turning up towards the end of next year. With a balanced portfolio we can see it through. While one market will soften there are other areas that will see us through
"As a wholesaler I think we are in a very strong position. We are looking at growth of 8% to 14% in terms of GWP."
Other players intend to rely on expertise within niche markets or size, an area Allianz Cornhill Commercial national key account manager Dave Ball sees as crucial.
He said: "The successful brokers will be the ones adding value to their customers, around risk management and business needs. These are the ones that can engage with their clients as opposed to just selling them insurance.
"The major driver for consolidation remains the ageing broker profile. I don't think the FSA is the key issue. Size will be an issue. Below £40m GWP many brokers will not be viable. It is all about scale or niche areas."