Several factors have sparked a wave of acquisitions in the middle-market insurance industry. The U.S. insurance business is huge, with about 3,000 life insurance companies, 2,000 property and casualty insurance companies and 20,000 insurance brokerage firms. Property and casualty insurers are motivated to sell, due to capital concerns, low interest rates and premium price stagnation. (For more coverage, see Racking Up Regional Insurers.) Private equity firms have been attracted to life insurers, because of low interest rates, attractive revenue streams and potential investment management fees. Buyers have also been drawn to insurance brokerages, due to cash flows, sticky clients and improved efficiencies through scale.

Smaller property and casualty insurance companies, especially those valued at $75 million and under, are being gobbled up by larger companies because most of them don't have access to capital to grow and their returns on invested capital, which are restricted by state regulators, have been poor, says Andrew Barile, an insurance industry consultant in Savannah, Georgia. AmTrust Financial Services (Nasdaq: AFSI), a multi-national specialty and workers' compensation insurer led by Barry Zyskind, is an acquiring company that's been busy in that arena.

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