(Reuters) - Private equity firm Onex Corp (>> ONEX Corporation) is exploring a sale of USI Insurance Services, hoping that a deal will value the U.S. insurance brokerage at as much as $4 billion, including debt, according to people familiar with the matter.

A sale of USI would underscore the wave of consolidation sweeping the commercial property and casualty insurance market, which has not grown quickly enough to support the smaller brokerages, and has attracted buyout firms keen to cut costs.

Onex is working with Bank of America Corp (>> Bank of America Corp) on an auction for USI, the people said this week, cautioning that no deal is certain.

The sources asked not to be identified because the sale process is confidential. USI and Onex did not respond to requests for comment, while Bank of America declined to comment.

Based in Valhalla, New York, USI delivers property and casualty, employee benefits, personal risk and retirement solutions. It generates more than $1 billion in annual revenue, has a staff more than 4,400, and operates out of 140 local offices serving every U.S. state, according to its website.

USI generated earnings before interest, taxes, depreciation and amortization in the 12 months to the end of September of $347 million, and had net debt of $1.8 billion, according to Onex's most recent quarterly financial report.

Onex acquired USI in December 2012 for $2.3 billion from Goldman Sachs Group Inc's (>> Goldman Sachs Group Inc) private equity arm, funding $702 million of that through equity and borrowing the rest with debt placed on the company.

The biggest deal last year in the insurance brokerage sector was the merger of Willis Group Holdings and Towers Watson, which was completed last January and created Willis Towers Watson Plc (>> Willis Towers Watson PLC), a company with a $17 billion market capitalization.

Last November, Greg Williams, the chief executive of Acrisure LLC, an insurance brokerage that was controlled by private equity firm Genstar Capital, completed a $2.9 billion management buyout of the company.

USI has been very active in buying small regional rivals. It has been seeking to beef up USI ONE Advantage, an interactive platform that helps the company share information with sales consultants sitting in offices around the United States.

(Reporting by Greg Roumeliotis in New York; Editing by Tom Brown)

By Greg Roumeliotis