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Insurers shift toward hybrid growth structures as capital costs rise

Aon says higher funding costs and softer market conditions are making large deals harder to justify, pushing insurers to mix ownership, investment, control, and integration.

Reported · Written up by our desk · Industry & Deals

Aon, the professional services firm focused on risk and insurance solutions, says insurers are changing how they approach mergers and acquisitions as economic conditions and higher capital costs make large-scale acquisitions more difficult to justify.

Instead of relying only on full ownership or building capabilities internally, Aon says insurers are increasingly considering hybrid growth structures that sit between acquisitions and organic expansion. These arrangements are designed to let insurers access specialist expertise, technology, distribution, or underwriting capabilities without taking full ownership of another company.

Aon adds that while hybrid approaches can provide a more capital-efficient route to growth and reduce some integration challenges, they also create their own issues, including governance, accountability, operational control, and dependence on external partners.

The firm says consolidation is becoming more selective, driven by softer market conditions, higher funding costs, and closer scrutiny of capital efficiency, earnings resilience, and execution risk. In Aon’s view, insurers are now matching transaction structures to specific business needs rather than treating acquisitions as the default option, with Kathleen Monaghan saying the key challenge is identifying the real problem the growth move is meant to solve.

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