Buyers and sellers reported 451 mergers and acquisitions of insurance agencies in 2015 in U.S. and Canada, according to a recent report from OPTIS Partners. That’s more than ever before—and marks a 26% increase from the previous record of 357 in 2014.

Since M&A transactions hit a low in the third quarter of 2013 due to an increase in federal capital gains tax between 2012 and 2013, activity has taken off. Private equity-backed firms accounted for 242 transactions last year—an increase of more than 50% from the year before. These buyers accounted for 54% of deals, marking the first time any buyer group has made the majority of transactions since OPTIS began tracking M&A activity in 2008. “2015 Agent-Broker Mergers & Acquisitions” also reports growth of private equity-backed firms from 16 active buyers in 2008 to 20 in 2015.

Investors see the insurance brokerage business as an opportunity to make reasonable returns in an economy where they have few options to do so, according to the report. While private equity-backed buyers acquired more than they had prior to 2015, the next two most active buyer groups—private and public brokers—acquired less.

Tim Cunningham, managing director of OPTIS, says an aging population is one of the main drivers behind the ongoing M&A surge. “A lot of boomers own equity interest in agencies or they own agencies, so you’ve got a well-capitalized buy group, and you’ve got increasing inventory because a lot of folks have done an inadequate job in planning for perpetuation,” he explains. “Their only alternative is a third-party sale.”

The main problem? Many agency principals plan their perpetuation as an event rather than a process. “The results reflect the severely inadequate job that most firms have done on perpetuation,” Cunningham says. “It’s a long-term process, so thinking in terms of a year or two before you want to exit is not going to happen.”

Still, Cunningham acknowledges that some agencies don’t just resort to M&As as a plan B. “Some firms were well positioned to perpetuate themselves internally, but they see high valuations and they see the need to affiliate with a larger organization for market strengths,” he says, noting that small employee benefits agencies in particular have a hard time competing.

The report, which covers agencies selling property-casualty insurance, employee benefits insurance or a combination of both, finds that the majority (57%) of 2015 sales consisted of strictly p-c agencies. Agencies selling both p-c and employee benefits made up 17% of sales, while another 17% consisted of solely employee benefits sales. The remaining 9% consisted of other sales.

Cunningham attributes the low frequency of employee benefits agency sales to a shift in compensation resulting from Affordable Care Act implementations. While traditional commissions were a percentage of premiums, agencies are now using capitation more commonly.

“I think that’s pulled back on commission increases,” Cunningham says. “The potential difficulty is because of the Affordable Care Act: If a buyer doesn’t have a fairly robust value added service platform, I think they maybe see employee benefits as a not-so-attractive part of the business.”

An agency’s attraction also depends largely on its size and geography—an urban location tends to weigh more for buyers. “A $500,000-commissions agency in central Illinois, for example, is going to have fewer potential acquirers than the same agency in Chicago,” Cunningham says. In general, “a smaller size in a less populous region probably has fewer potential buyers.”

As long as no significant economic upheavals shake the M&A market, OPTIS expects no changes in current M&A patterns.

Jordan Reabold is IA assistant editor.