Rating agency Moody’s Investors Service has changed its outlook on the global broking sector from positive to stable, with a mid-single-digit growth rate expected.

The new report says broker revenue growth will be lower than expected but still strong for the year, with some speciality brokers likely to increase beyond the expected rate.

Moody’s says the lowered growth underlies the outlook shift as a slowing economy and smaller commercial property and casualty (P&C) rate increases contribute to decreased earnings.

GDP growth amongst G-20 economies is expected to slow to 2.0% in 2023 and 2.4% in 2024, down from 2.7% in 2022.

It expects brokers to maintain solid earnings before interest, tax, depreciation and amortisation (EBITDA) and “good control over their credit metrics” despite the economic downshift.

“Even in a slowing economy, insurance brokers will benefit from the mandatory or critical nature of many P&C and employee benefits offerings and from further rate increases in most commercial P&C lines,” Moody’s said.

The rating agency says the economic conditions will push brokers to become “increasingly selective in their acquisitions”, although it expects activity as the sector remains “fragmented”.

“Leading insurance brokers in the US and Europe will continue to acquire smaller players to expand their geographic reach, add product capabilities, and gain process and expense efficiencies, “Moody’s said.

The outlook highlights investments in technology, analytics and cyber as key priorities to push the industry’s growth.

“The technology push is an important driver of consolidation in the brokerage sector,” Moody’s said.

“Brokers are investing in digitisation, machine learning and robotics, and they are shifting these efforts to the cloud to enable faster updates and broader usage.”