Insurance broker Towergate is to merge with four other insurance businesses in a deal that will create a major new player in the industry.

The deal will combine the insurance companies owned by private equity groups HPS and Madison Dearborn, both of which have been active acquirers in the industry.

As well as Towergate, the new group will include brokers Autonet, Chase Templeton and Price Forbes. It will also include Ryan Direct, an insurance services business. Together the group will employ 5000 people and generate annual revenues of about £500m.

The new company, to be called KIRS, will be chaired by John Tiner, the former chief executive of the FSA who is chairman of Towergate. David Ross, Towergate’s CEO, will be chief executive.

The combination comes amid pressure on insurance brokers’ business models. In personal insurance, customers are moving to the internet while in some parts of commercial insurance prices have fallen sharply, pushing commissions down.

Towergate has had a troubled history. After racking up debt via a string of acquisitions, the company underwent a debt for equity swap in 2015 that left HPS in charge. Since then, Mr Tiner and Mr Ross have been restructuring the business.

After the combination, the group will look to refinance up to £800m of debt on the capital markets. However the five businesses will still be run separately, each with its own management team.

John Tiner said:

Today’s announcement demonstrates the tremendous confidence our major shareholders have in the businesses we are bringing together and the opportunities for further expansion.

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