The risks for insurers of owning an insurance broker

In my opinion, this depends on the purpose of the acquisition. If they buy the brokerage as a quick way to acquire a sales force for their own products, they run the risk that the best salespeople will leave that brokerage in order to maintain independence.

If they bought it just because it's profitable and don't plan to make major changes, the risk wouldn't likely be greater than in any other venture capital acquisition.

Frankly, if all they wanted was to boost their sales force they don't need to go through the trouble of buying a brokerage - they would just need to work out a contract with them to sell their products and if those products are competitive then the brokerage will naturally end up selling them rather than others. This arrangement is cheaper than buying the firm out and flexible since the company can decide at any time to adjust commissions on new business or stop taking new business without the overhead of a bunch of career agents.

But in general, Mainly, concentration of distribution, anti-selection, anti-money laundering issues, customer protection.

Risks will, as usual, depend on the specifics of the situation. In the general case, I can think of (in no particular order):

Concentration of distribution -- It could happen that the insurance company becomes dependent on just a few distributors. Directly owning a broker could help diversify the distribution network -- but at the other extreme a company could become over-reliant on this one broker, resulting in increased risks (IT problem, data loss / data theft, reputation, changes in customer behaviors, etc.).

Anti-selection -- The broker will want to maximize its sales volumes, regardless of the "quality" of the underwriting (am exaggerating); the insurer will want to maintain claims levels low by selecting the risks it underwrites. From the insurer perspective, it must be able to provide the well-balanced incentives to the sales-force -- that's an art.

Anti-money laundering (AML) issues -- AML regulations vary by country, but the different actors (banks, distributors, insurers) have different responsibilities. So owning a brokerage firm means accepting more responsibilities for AML processes. High fines and even jail time are very much possible for the responsible officers.

Customer protection -- As Kapil Mehta says, a broker has a legal duty to act in the best interests of its clients, selecting the best product for the clients' needs  -- one of the major differences with an insurance agent that sells the products of typically only one company. Regulations put restrictions on insurance companies owning brokerage firms in order to avoid this conflict and protect the customer. In France for example, "exclusive brokers" must advertise that they only work with one insurance company. Those are delicate matters, esp. with as reputation can get hurt quickly on social networks.