Evaluate carrier relationships, book-of-business quality, retention rates, and regulatory compliance before acquiring an independent P&C agency.
Find Insurance Agency Acquisition TargetsAcquiring an independent insurance agency requires scrutinizing recurring commission quality, carrier appointment transferability, and producer dependency. With valuations ranging 4–7x EBITDA, disciplined due diligence protects against post-close revenue erosion from client attrition or carrier relationship disruptions.
Validate that reported commission and contingency income is recurring, predictable, and not artificially inflated by one-time windfalls or unsustainable carrier bonuses.
Break down gross commissions by line of business, carrier, and policy type. Identify any single carrier exceeding 30% of total revenue, which signals dangerous concentration risk.
Request 3 years of carrier contingency statements. Confirm income is based on loss ratios and growth performance, not one-time arrangements unlikely to survive ownership transfer.
Recast financials to remove personal auto, excess owner compensation, family payroll, and discretionary expenses. Confirm true EBITDA meets the $300K minimum acquisition threshold.
Assess the durability of the revenue base by analyzing policy-level retention, client concentration, and the degree to which relationships are tied to the exiting owner versus the agency.
Calculate trailing 3-year retention for personal, commercial, and specialty lines separately. Target agencies with 85%+ overall retention; below 80% signals systemic client flight risk.
Request a ranked client list with annual premium and commission by account. Flag any single commercial client exceeding 10% of revenue as a material post-close attrition risk.
Identify which clients are managed by the exiting owner versus staff producers. Quantify revenue at risk if founder departs and confirm stay agreements with key account managers.
Confirm that carrier appointments are transferable, E&O history is clean, and all licensing and regulatory obligations are current before executing a purchase agreement.
Pull all carrier appointment agreements and confirm consent-to-assign clauses. Some A-rated carriers require individual underwriter approval, which can delay or block closing timelines.
Request 5 years of E&O claims history and current policy declarations. Recurring claims or gaps in coverage are red flags that affect representations and warranties insurance availability.
Verify all producers hold active state licenses in required lines. Review employment agreements for non-solicits and confirm key staff are willing to sign retention agreements at close.
Target 85% or higher overall policy retention, with commercial lines ideally above 88%. Below 80% suggests systemic client dissatisfaction or heavy owner dependency that will accelerate post-close attrition.
Not automatically. Most carrier appointments require written consent-to-assign. Start the carrier approval process early — some A-rated carriers take 60–90 days to approve new agency ownership, which can delay closing.
Asset purchases using SBA 7(a) financing with a 10–20% seller note are most common. Earnouts tied to 85%+ book retention over 12–24 months are frequently layered in to protect against post-close client attrition.
Review 3 years of carrier contingency statements and confirm eligibility is based on loss ratios you can sustain, not volume thresholds the seller barely met. Verify the agreements are assignable to a new owner entity.
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