The US insurance brokerage sector remains “financially solid” despite difficult economic conditions and the soft commercial property and casualty insurance markets.

The annual insurance industry brokerage “scorecard” by New York-based ratings agency Moody’s says while many brokerages have seen little growth, most have been able to maintain profitability.

The report’s co-author, Benjamin Goldberg, says the economic downturn and lower pricing resulted in marginal or even negative growth for some insurance brokers last year.

“A valuable service offering, a high proportion of variable costs and lack of underwriting or investment risk helped the industry remain profitable, though revenues declined from 2008 levels.”

He says brokers coped with challenging market conditions by cutting costs, exiting non-core operations and slowing the pace of acquisitions.

As a result, operating margins remained fairly stable, while fixed-charge coverage and financial leverage metrics improved “modestly”.

Since February this year, top brokers have once again been allowed to accept contingent commissions from insurers, providing them with the opportunity to “reap incremental revenues” and making it easier for them to acquire smaller brokerages that already accept contingents.

“Mergers and acquisitions will remain a strategic focus for major insurance brokers given the fragmented nature of the industry, particularly in the US,” co-author Bruce Ballentine said.