Key Insights
- Community financial institutions are resuming insurance agency acquisitions as private equity pullback creates a less crowded, reasonably priced market.
- Agency ownership generates recurring non-interest fee income and enhances cross-selling opportunities across commercial and retail relationships.
- Institutions should consider evaluating integration costs, technology investment demands, and dual regulatory compliance before pursuing agency deals.
In ancient Babylon, merchants spread their goods across multiple ships to reduce the risk of losing everything in a single voyage. In ancient Greece, people pooled their money in communal relief funds to help one another when misfortune struck. Ancient Romans formed burial clubs to help members afford dignified burials - an early forerunner of life insurance. By the 14th century, insurance had become more formalized, with an early written marine insurance policy recorded in Genoa, Italy.
Those early arrangements addressed a need that remains familiar today: helping people protect their financial well-being. For community financial institutions (CFIs), that goal also raises a strategic question: Does owning an insurance agency make sense for the institution and its customers?
Recent Insurance Acquisition Announcements
Recent acquisition announcements from Arrow Financial and First Commonwealth Financial bring that question into focus. An agency can offer opportunities to generate non-interest income and deepen customer relationships, but ownership also brings integration costs, ongoing investment needs, and additional compliance responsibilities. Here’s what CFIs should weigh before pursuing a deal.
Arrow Financial Agrees to Acquire Skene Valley Agency
The $4.5B-asset Arrow Financial Corporation in Glens Falls, New York last month announced that Upstate Agency LLC, a subsidiary of Arrow Bank, made a deal to buy Skene Valley Agency Inc., an independent insurance agency in Washington County, New York. The terms of the deal were not disclosed. Skene will be merged into Upstate Agency, which specializes in personal, commercial and group employee benefit insurance.
“This strategic growth opportunity will allow us to deepen Upstate Agency's presence in Washington County, where we have a long history of meeting diverse financial needs,” says David S. DeMarco, Arrow Financial’s president and CEO. “Customers will benefit from the strength of our insurance offerings while we demonstrate our commitment to growing all facets of the Arrow Family of Companies.”
First Commonwealth Financial Buys Pennsylvania Insurance Specialists
Also last month, the $12.3B-asset First Commonwealth Financial Corp. in Indiana, Pennsylvania said that its subsidiary, First Commonwealth Insurance Agency had completed a deal to buy for an undisclosed sum The Pennsylvania Insurance Specialists Inc., which provides coverage in the areas of home, auto, life and business.
“We are in the process of notifying PA Insurance Specialists customers of the acquisition and look forward to continuing to service all their insurance needs, and hopefully, introduce them to the many other services First Commonwealth Insurance Agency and First Commonwealth Bank can offer,” said First Commonwealth’s Michael Bartolini, president of FCIA.
Other recent deals for insurance agencies that CFIs have made include Colony Bankcorp’s April 2025 deal for the Ellerbee Agency in Georgia, and Columbia Financial August 2025 deal for Jeanne S. Frey Insurance Agency in New Jersey.
Why CFIs Stopped Buying Insurance Agencies and Why Some Are Buying Again
The growing announcements of deals mark a stark contrast to the 2022 – 2024 time period when CFIs shed insurance agencies as valuations for insurance agencies rose to all-time highs due to a feeding frenzy by private equity buyers. This caused many CFIs to sell their agencies at attractive prices to provide capital for other investments, as well as rightsize their balance sheet ratios in the higher interest rate environment at the time. Many CFIs also did not want to invest in more sophisticated technology and client resources to keep up with the competition, particularly when their plans for cross-selling bank products did not pan out as well as expected.
But starting in 2025 and picking up this year, CFIs are now starting to buy again. PE-backed agency buyers pulled back sharply in 2026 (a seven-year low) which is opening room for banks to re-enter a less crowded, less overpriced market. Now may also be a good time for CFIs to re-enter or expand as the insurance business is booming.
Indeed, insurance revenue at Arrow Financial has been growing across several coverage lines, DeMarco says: “On the commercial side, having property-and-casualty and life insurance are really great ties to a relationship. There's a lot of synergy there." The mortgage lender also has been able to sell homeowners insurance to new homebuyers.
Should Your CFI Consider Buying an Insurance Agency?
Before pursuing an acquisition, a CFI's board and executive leadership should weigh these practical considerations:
- Assess the strategic fit. Determine how an insurance agency would complement your existing services and support your long-term goals. Review your current fee-income mix to clarify what you want the acquisition to accomplish.
- Test the cross-selling potential. Evaluate whether your local loan and deposit customer base offers enough opportunity to support the business. Review existing cross-selling results rather than assuming customers will buy additional products.
- Calculate the full cost. Look beyond the purchase price to integration expenses, ongoing technology investments, staffing, and customer-service resources.
- Evaluate compliance demands. Account for insurance licensing, state regulatory requirements, and errors and omissions coverage alongside your existing bank compliance responsibilities.
- Compare alternatives. Consider whether a referral arrangement or partnership with an established local agency could meet your goals without the costs and responsibilities of ownership.
Owning an insurance agency can bring in additional non-interest income, as well as provide more opportunities to cross-sell bank products and services. Take the time to evaluate all of the pros and cons before deciding whether such a subsidiary fits well within your overall strategic plan.
