Briefing: MGAs still bullish as capacity crunch bites

By Jon Guy

June 2022 marked another packed annual conference hosted by the Managing General Agents’ Association (MGAA) in the City, as MGAs flocked from far and wide to gain insights into the current state of the insurance market and – in some cases – to find potential capacity.

The theme of this year’s MGAA conference was opportunity, but it is becoming increasingly evident that opportunities for MGAs are not as plentiful as they were when the MGAA last convened less than a year ago.

Interestingly, one of the sessions last month focused on where the best place to access capacity was – Lloyd’s or the company market?

In the past, this would not have even been a discussion - if the capacity was plentiful and the business plan was right, then a marriage between MGA and capacity provider was easily arranged.

The view now, however, is that an MGA needs to have a very particular and highly specific niche in order to entice capital and capacity.

It is not the case that there is no longer any willingness to engage with MGAs. However, the barrier to investment has been raised significantly as underwriters become ever more protective of their capacity and how best it can be utilised.

Sharing the pen again

The MGA sector is suffering along with the rest of the insurance industry, thanks to the ever increasing inflationary pressure on claims and the need for capacity providers to get a grip on their exposures and reserving strategies – this is heightening a move to keep capacity closer to home.

That is not to say that the MGA sector has lost all of its attractions.

The changing risk environment has created opportunities for MGAs due to their ability to move with pace – this is driven by their size and lack of legacy issues, coupled with the adoption of technology and the associated ability to reduce frictional costs.

Many MGAs at the trade body’s conference stated that they are looking to the future with a great deal of optimism, believing that brokers will be looking for new and innovative solutions to the changing risks faced by clients – and hoping that MGAs will be best able to react.

To do this, however, they will need capacity. Therefore, the willingness of (re)insurers to once again find the confidence to hand over the pen will be vital.