The 30/55 rule is the most widely used benchmark for measuring carrier concentration in agency M&A, and it's simple: no single carrier should represent more than 30% of revenue, and the top three combined should stay under 55%. Cross either threshold and the book enters what experienced buyers call the fragility zone — a state where a single carrier's decision can unwind a material portion of the book. The metric applies to commission revenue, not premium, because commission is what drives agency economics, and commission concentration can differ from premium concentration when rates vary across carriers.
§ 01 · Why it's the fragility zoneConcentration is leverage.
A carrier that represents 35% of revenue holds functional veto power over any material decision the agency makes — including the decision to sell. Change-of-control consent, binding authority, contingency eligibility, and loss-ratio tolerance all become negotiations rather than baseline terms, because the carrier knows the agency can't re-place the book on short notice. Every renewal cycle is a renewed concession. The existential-threat test makes it concrete: ask what happens to the agency if a given top carrier walks. If the answer involves cutting staff, losing office space, or restructuring the book, that carrier is an existential threat — and 30% is the conservative line where the answer starts to tilt toward yes.
§ 02 · The two thresholdsAnd the severity ladder.
| Test | Threshold | What it measures |
|---|---|---|
| Top one | Under 30% | Substitutability — the carrier can't dictate terms |
| Top three | Under 55% | Durability — can the agency survive losing any one relationship |
| Severity ladder | 40% / 65% | Single carrier over 40% or top three over 65% — the steeper haircut |
The gap between the small-agency norm and the enterprise norm is the whole story. Small agencies run a top-three concentration of roughly 59% on average — already inside the fragility zone — because a handful of appointments generate most of the production volume; that concentration is the natural state of the small-agency model. Enterprise brokers sit near 17%, achieving diversification by volume: hundreds of appointments spread the dependency thin and make any single carrier replaceable. The 42-point gap is the structural-safety premium enterprise multiples capture, and it's why the benchmark is a direction to move, not a number small agencies are expected to hit.
§ 03 · The haircut and the modifierPersonal vs. institutional.
A top carrier over 30% typically triggers a 0.5–1.0× EBITDA haircut before any other adjustment — at a 7× baseline, a full turn is a 14% cut to enterprise value. The haircut is the price of uncertainty, not of observed loss: concentrations can hold for years and then correct violently in a single carrier cycle, and markets price risk, not history.
One variable decides whether concentration is dangerous or merely notable: whether the concentrated relationship is personal or institutional. A relationship built on a 20-year friendship with a specific underwriter rarely transfers — when the selling principal walks, the history, the flexible binding authority, and the off-cycle contingency consideration go with them, and a concentrated personal-relationship book can lose 30% of its effective value in the transition. An institutional relationship governed by a formal appointment and corporate-level underwriting decisions is far more durable; it's still a fragility-zone asset, but it's far more likely to survive the ownership change.
§ 04 · The two playbooksBuyer triage, seller preparation.
For buyers, the rule is the triage filter: agencies inside the line move to the next diligence stage at full multiple, agencies outside it move to a risk-adjusted price. The checklist on a concentrated book has four items — verify the top-three numbers against carrier statements rather than the seller's summary, confirm whether the concentration is personal or institutional, map the appointment portfolio for alternatives that could absorb rewrites post-close, and price the concentration explicitly through a multiple discount or through structure like escrow holdbacks tied to specific carrier consents. For sellers, the rule is the map for the two-to-three-year preparation window, worked with three levers: additive diversification that brings on new appointments to absorb incremental business, rewrite migration that places renewals with alternative carriers at the cost of some commission, and demonstrated trajectory — a top-three trending from 62% to 48% carries more weight than a flat 52%, because it shows the book becoming more durable.
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Terminology on this shelf
- The 30/55 rule
- No single carrier over 30% of commission revenue, top three under 55% combined — the diversification benchmark.
- Fragility zone
- The risk profile of a book outside the thresholds, where a single carrier loss can destabilize the business.
- Existential-threat test
- Asking what happens if a top carrier walks — the qualitative version of the 30% line.
- Concentration haircut
- The 0.5–1.0× EBITDA discount on a book with a carrier over 30%, steeper above 40% single or 65% top-three.
- Personal vs. institutional
- Whether the concentrated relationship rides on an individual underwriter or a corporate appointment — the transfer-risk modifier.
- Demonstrated trajectory
- A downward concentration trend that tells a better story than a flat point-in-time number.