What's going on?

US-based Marsh & McLennan (MMC), one of the largest insurance companies in the world, is dropping $5.6 billion on British insurance broker Jardine Lloyd Thompson (JLT) � which saw its stock shoot up 31% as the news hit on Tuesday.

What does this mean?

JLT has been beefing up its US business and it seems MMC wants a piece � nay, the whole pie! The two insurers combined will create a mega-insurer, with an anticipated yearly revenue of $17 billion. The new company�s also gunning to benefit from synergies (lowering costs, partly by removing duplicate ones) of $250 million over the next three years.

Why should I care?

For markets: A pre-Brexit exit.

MMC�s paying a premium for JLT�s shares � 34% more than their closing price on Monday. When a company buys another company, it typically offers more than the going rate for its stock: buying the whole company (i.e. control of it) tends to cost more than buying just a share, and existing shareholders might need some encouragement to sell. JLT had shuffled its pack and reorganized earlier this year in preparation for Brexit. And while it wasn�t aiming to sell itself, an American owner may help shield JLT from potential political uncertainty in Europe.

The bigger picture: Come together, right now.

Insurance companies are consolidating the world over. Nestl� is selling its life insurance business, French insurer AXA bought Bermuda-based XL Group for $15 billion in March, and AIG has said it�ll buy (interestingly, also Bermuda-based) Validus for around $5.6 billion. Insurance companies swallowing up other insurance companies (which are often focused on �specialty� areas, offering insurance for unique circumstances) is a way for them to grow bigger, faster � and to get rid of some of their opponents. Competition keeps policy prices low, which is good news for customers. But low insurance prices (as they are, relatively, now) mean that there�s more of a risk for insurance companies � they�re the ones who�ll lose when it�s time to pay out on policies.