Days numbered for MGAs

Is this the death knell for MGAs? Norwich Union and AXA are snatching back the pen as part of a wider crackdown on commissions and leakage from the value chain. As AXA boss Maso points out in Insurance Times this week, the MGA model was developed for a very different economic climate, and there are serious questions over whether it can survive.

Primary insists that its current round of discussions with all its insurer partners is nothing out of the ordinary. “This happens every February,” says a spokesman. “We collate all the statistics, we look at new business, we look at exposures and ultimate loss ratio and all that information goes into the melting pot. We have seven or eight insurer relationships covering our various products, and we are talking to these people all the time.”

But the market says different. While AXA and NU have both declined to comment, it is pretty clear that something is wrong. “AXA lost its shirt on the deal,” says one source close to the company. “It didn’t really have a choice but to walk away.”

AXA’s contract expires at the end of this month and will no be renewed, leaving Primary in pressured negotiations with replacement providers. It has already signed Fortis up to provide capacity for another of its subsidiaries, UK Underwriting, and given its good relationship with new MD Mark Cliff (formerly of AXA), further deals would not be a surprise.

Primary still has a chance of saving its relationship with NU – but it’s a slim one. If a radically different deal can be reached, perhaps NU will stay on past September, when its current deal expires.

It is more likely, though, that the major composites such as AXA and NU will prove true to their respective chief executive's threats and continue to shed MGA relationships as the current deals expire. This does not necessarily spell the end of MGAs – smaller and niche players will continue to provide capacity. But for now, the hey-day is over and the pressure is on.