Concentration risk — the 30/55 rule, durability.

Carrier concentration risk parallels customer concentration risk but on the supply side. The agency depends on its carrier appointments for product, capacity, and economics. Heavy concentration to a single carrier means single-carrier action — a termination, a non-renewal, a rate increase, a binding-authority restriction — produces book-wide consequences. The diligence quantifies the exposure.

Single-carrier and top-three thresholds.

The 30/55 rule is the industry-standard concentration discipline.

• 30% single-carrier threshold. No single carrier should account for more than 30% of agency premium. Above 30%, the carrier's commercial behavior — appointment continuation, contingency adjustments, binding-authority restrictions — directly affects book economics. Above 40%, the relationship approaches captive-agency dynamics where the agency's leverage with the carrier drops sharply.
• 55% top-three threshold. The top three carriers combined should account for less than 55% of premium. Above 55%, the agency is structurally dependent on a small number of carrier relationships; a coordinated action by two of them creates existential exposure.

Concentration is structural risk, not commercial risk. The carrier's regulatory situation, financial health, or strategic-direction change can be entirely outside the agency's control — and the concentration determines how much that uncontrollable risk matters.

When aggregate hides line-specific risk.

Aggregate concentration can pass the 30/55 test while specific lines fail it sharply. Workers' comp concentrated 80% to one carrier; commercial auto 60% to another; cyber 100% to a third. The aggregate distribution looks healthy; each line is concentration-vulnerable.

The diligence decomposes carrier concentration by line of business:

The buyer's pro-forma should treat per-line concentration risk explicitly. A book that's 30% carrier-concentrated at the aggregate level may have 70%+ concentration in two LOBs that together carry 40% of EBITDA. The aggregate-level pass hides the line-level vulnerability.

Tenure, growth-dependency, commercial dynamics.

Appointment durability is the qualitative layer on top of the concentration measurement. A 30% top-carrier in a long-term, mutually-profitable relationship is different from a 30% top-carrier in a recent appointment with growth-dependent contingencies.

Three durability dimensions matter:

• Tenure. How long has the appointment been in place? 20+ year appointments have institutional momentum; carrier-side personnel changes and strategic shifts have already been weathered. 3–5 year appointments are still in proving-ground phase.
• Growth-dependency. Does the carrier relationship depend on continued agency growth — through premium thresholds, new-business volume requirements, or appointment-renewal contingencies? Growth-dependent relationships are more fragile in soft-market or low-growth conditions.
• Commercial dynamics. Are contingencies steady or volatile? Has binding authority been broadened or narrowed over time? Has the carrier-side relationship manager changed recently? These soft indicators predict appointment health.

The diligence aggregates concentration measurement (30/55 numbers) with durability assessment (qualitative factors) to produce a carrier-relationship risk profile. The profile feeds the deal-structure decisions — escrow holdbacks for concentration risk, earnout structures keyed to carrier retention, R&W package treatment of carrier-relationship representations.

The concentration-risk layer integrates with the transferability layer (will the carrier consent to the deal?) and the financial-performance layer (is the carrier itself healthy?). Together they form the core of carrier DD. The structural-complexity, execution-strategy, and policy-portfolio layers add operational depth. The Pillar — Carrier Due Diligence for Buyers — covers the broader framework.