In Focus: How can MGAs entice insurers to provide capacity amid challenging market conditions?

WE ASKED: ’How can MGAs entice insurers to provide capacity amid challenging market conditions?’

Mike Keating, chief executive, Managing General Agents’ Association

“First and foremost, the outlook for MGAs is extremely optimistic, despite challenging market conditions. Enticing capacity providers will unlikely be an issue, providing that the MGA can demonstrate underwriting expertise in its specialist product line.

“MGAs also need to demonstrate excellent governance oversight, real-time data capture and analysis and – fundamentally – that they will be able to deliver long-term underwriting value in a partnership.

“There are currently a lot of new MGAs entering the market - it’s very buoyant and there’s a significant increase in the number of insurers looking to partner with MGAs, which is great to see.

”This increase is demonstrated by our growing insurer membership tier. We’ve brought in a number of new insurer members over the last year that are very keen to partner with MGAs.

“So, in summary, providing MGAs show these key hygiene factors around underwriting expertise, excellent governance and offering something different to the market, then there will always be capacity providers out there that want to partner with them.

“The main opportunities for MGAs now are that they can provide an unrivalled level of service to the broker community, which includes access to specialist, niche products and – critically – decision-makers, as well as offer guaranteed turnaround times on renewals and new business quotes.”

Ben Smyth, chief executive, Arma Karma

“The MGA environment is undoubtedly becoming more and more challenging and it’s up to us to make ourselves more attractive to insurers.

”There has been a period where it was enough to exist purely as a distribution machine to obtain capacity as an insurance intermediary, however underwriting and loss ratios have been neglected across certain insurance lines as a result.

“Now, MGAs – and especially insurtech MGAs – need to realign priorities towards underwriting results alongside growth. Only those managing to build and maintain a sustainable portfolio that delivers profit across the value chain will survive and thrive.

”Opportunities still very much exist for those that are able to take a more holistic approach, focusing not solely on innovative distribution, but also ensuring that risk management and true underwriting sit at the heart of the business.

”MGAs that can successfully innovate against fraud, anti-selection and opportunists will reap the rewards and attention from the entire insurance market.

“Appetite to support MGAs is still strong and the market need for their existence will not disappear.

”By keeping a low cost base and staying lean and agile, MGAs can demonstrate that they are well equipped to react to market and environmental conditions, including the cost of living crisis.”

Phil Ost, head of personal lines, Zurich

“One word springs to mind – cut through.

”In a highly competitive market where there’s been a notable rise in MGAs and a natural ceiling to capacity interest, an MGA has to create a strong, compelling proposition to attract and then secure insurer capacity.

“At Zurich, we ask ourselves a couple of key questions in our initial assessment – is the MGA of sufficient scale? Is there a solid track record of delivering a profitable return, or – where issues have been encountered – can we validate they’ve been fixed and the MGA is back on track?

“As a multichannel, multiline insurer operating across the whole market, we’d also be looking for something different to our already diverse portfolio, to add value and avoid any cannibalisation.

”So, where an MGA can demonstrate real expertise in a specific segment that is ideally outside the commoditised mass market, we’d be more interested. Hence our partnerships with our current MGA partners in the non-standard arena across motor, home and travel lines.

“Finally, we shouldn’t underestimate the importance of chemistry in partnership.

”As we look for longer-term, five-year arrangements, we ask ourselves early on in the triage process whether we can work with the MGA’s management team and their underwriters – can we see an open and transparent way of working?

“Ultimately, the risk sits on our balance sheet and – given the level of delegation – there has to be plenty of mutual trust.”