{ “title”: “5 Ways Politics Might Influence Insurance Agency Buying and Selling in 2025”, “description”: “As Washington shifts, insurance agency owners should consider how political changes, including interest rates, regulations, and tax policies, will affect mergers and acquisitions (M&A) this year.”, “tags”: “insurance, mergers and acquisitions, M&A, politics, regulations, tax, interest rates”, “rewritten_content”: “With rapid changes occurring in Washington, insurance agency owners and other business leaders are understandably focused on how these shifts will affect growth opportunities, particularly regarding mergers and acquisitions (M&A). Here are five key ways recent political and economic events could influence decisions to buy or sell an agency in 2025.nn## 1. Declining Interest RatesnnWhile interest rates are trending downward, the decline isn’t happening as quickly as projected. In December, the Federal Reserve Board (the Fed) predicted several rate cuts. However, persistently high inflation makes it less likely the Fed will lower rates significantly anytime soon. Cuts to the Federal Funds Rate influence the prime rate, which is about 3% higher. Although immediate impacts on retail borrowers may be delayed, many business lenders utilize Treasury bond yields, tied to the prime rate, as their benchmark. Nevertheless, current rates are still lower than in much of 2024. Lower interest rates make deals more attractive and will likely promote M&A activity across all sectors.nn## 2. Reduced RegulationnnFormer President Donald Trump has signaled intentions to reduce regulations. In the insurance industry, deregulation could ease operations and simplify consolidation post-sale. Trump has also indicated more lenient policies regarding antitrust, which could stimulate M&A. However, the Republican base’s growing populist leanings could lead to pushback against significant mergers, notably in the tech industry.nn## 3. Tax ConsiderationsnnThe Tax Cut and Jobs Act (TCJA), enacted during Trump’s first term, is likely to be revisited in some form. Most of its provisions have expired or are set to sunset by the end of 2026, and many are expected to be reinstated or made permanent. Important aspects to watch include 100% bonus depreciation for business purchases, lower individual tax rates, and reduced corporate tax rates (potentially as low as 15% for certain manufacturers within the United States). Moreover, continuing the 20% pass-through deduction for small business owners could benefit many independent agency owners. Lower individual taxes might free up funds for additional insurance spending, and reduced corporate taxes could lead to business expansions, increasing business insurance demand. These trends could foster organic growth, an agency characteristic highly valued by buyers. Trump has also expressed interest in lowering the capital gains tax rate, which could encourage some sellers to list their agencies sooner, anticipating reduced tax implications.nn## 4. Effects of TariffsnnTrump has announced tariffs on goods from China, Canada, and Mexico, along with reciprocal tariffs on imported U.S. goods subject to fees like VAT. Tariffs could negatively impact insurance agency profitability by disrupting supply chains and inflating the cost of materials needed for claims. Reduced profitability could put downward pressure on agency valuations, affecting sale prices. Conversely, tariffs might boost business insurance as companies onshore their manufacturing to avoid tariffs. Expanding domestic businesses could drive up insurance demand, and agency profits may increase.nn## 5. Weather and Climate FalloutnnThe insurance industry has been significantly impacted by the 2024 hurricanes, the Los Angeles wildfires, and other climate-related events. As companies regroup and recover, the costs associated with these weather events will need to be managed. The financial consequences of the losses from 2024 and early 2025 can affect agency profitability and valuation in the years ahead.nn### Is 2025 a Good Time for M&A?nnSome experts anticipate a strong year for M&A. Agency owners considering selling or buying should carefully assess potential deals with expert guidance, including a trusted lender knowledgeable in the insurance industry. If the fundamental aspects of a deal align, 2025 could present a great opportunity for both buyers and sellers.nn” }
