One broker highlights fears that MGAs may be looking ’to all sorts of weird and awful sources of capacity’

When Insurance Times asked UKGI brokers for their views on capacity during the publication’s latest managing general agent (MGA) survey – conducted between June and August 2023 – plenty had concerns about the longevity and stability of these arrangements.

Capacity is the lifeblood of MGAs, given that this capital determines the amount of risk such a firm can underwrite on behalf of insurers.

If an MGA is not provided with capacity from its insurer partners, it simply would not be able to function.

However, while MGAs and the functions they perform in the market have become more vital – especially to brokers – capacity has been a key talking point.

Speaking back in June 2023, Mike Keating, chief executive of the Managing General Agents’ Association (MGAA), said MGAs were not suffering from capacity issues – so long as they delivered a return to their capacity providers and fostered a productive partnership.

But it seems brokers have been concerned by what they have seen over the last year across the MGA market, with worries being highlighted in the 2023/24 Insurance Times MGA Data Book.

For example, one broker stated that all MGAs in the personal lines arena “are under pressure where they are not getting capacity from one of the large composites”.

“The economics just don’t seem to be able to work in this space,” it added.

Another stated that “all MGAs, to some degree or other, are under threat of losing capacity due either to their management decisions or the decisions of the capacity holders/security providers”.

Economic pressure

These capacity concerns arose following economic pressures hitting the UK – this was driven by geopolitical uncertainty and heavy natural catastrophe losses.

For example, Aon’s 2024 Climate and catastrophe insight report, which was published in January 2024, found that the cost of global natural disasters for the world’s insurance industry reached £92.9bn in 2023 – 31% over the average for the 21st century. 

Other economic pressures include high inflation, which started to bite in 2022 and was exacerbated by the conflict in Ukraine and knock-on effects on energy markets. Back in January 2023, figures from the Office for National Statistics showed UK inflation at 10.1%, as measured by the Consumer Prices Index.

These varying factors created the need for capacity providers to get a grip on their exposures and reserving strategies.

One SME broker said: “As UK insurers withdraw, it leaves MGAs looking to all sorts of weird and awful sources of capacity.”

This train of thought was highlighted by a variety of brokers – one said they were concerned about “MGAs using untested capacity and losing it the following year”.

“[This results in] poor service for the client,” it added.

And another claimed: “A change in capacity can often mean changes to appetite and ability to write certain risks, which has meant that some renewals have not been invited by new capacity providers.”

A mid-corporate broker added: “An MGA’s capacity arrangements often depend on the competence and reliability of its employees and partners.

“If an MGA experiences difficulties in recruiting, training and retaining highly qualified employees, or if the partner lacks stability, there may be challenges to the long-term nature and stability of the capacity arrangement.”

capacity removal

Next steps

Brokers shared these insights after completing the questionnaire that informed Insurance Times’ Five Star Rating Report: MGA market 2023/24. Headline figures from this research were published in September 2023 and the full report was released in January 2024. 

The report investigated brokers’ opinions, attitudes and levels of satisfaction with the services they receive from their MGA partners.

When brokers were asked how important the underlying capacity arrangements of an MGA were, 45% said this was very important, while 24% said it was somewhat or extremely important.


Meanwhile, when brokers were asked how concerned they were about the possible removal of capacity from an MGA, 40% said they were moderately worried, while 24% said they were very concerned.

A total of 1,850 brokers provided feedback for the report.

Tim Baxter, head of broker development at MGA Prestige Underwriting, told Insurance Times that it took concerns over capacity “very seriously”.

“The results were pretty clear that it was a concern throughout the broker market,” he said.

“It has been a long-standing core focus and priority of ours – the capacity rating.

“[Capacity] is a big tick in the box for the broker and that certainly helped in conversations and new partnerships we have entered into.”

Andy Hurrell, founder and managing director of Corin Underwriting, added that the key for MGAs was to “present themselves to the market” to reduce the risk of capacity being pulled.

He highlighted that an example of this was credit rating agency AM Best assigning the firm with a performance assessment of PA-3 (Strong).

AM Best awarded the rating in August 2023 due to Corin Underwriting’s “strong underwriting capabilities, excellent governance and internal controls, strong financial condition, strong organisational talent and strong depth and breadth of relationships”.

“That was a way of just underlining to insurers, as well as the market, that we do really feel that we can act as agent and the insurer,” he explained.

“We also look to have all of our core facilities on evergreen so there is no expiry date – and that gives some great confidence to brokers in the marketplace.”

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