However, having capacity to back up specialist schemes could provide ‘one more bite of the cherry’ says broker chair
Insurance2025: Although broker consolidation has been continuing at pace throughout the Covid-19 pandemic, the MGA market has not seen the same trajectory as “capacity is being a lot more choosy” post-pandemic, said Stuart Reid, chair at broker Partners&.
Speaking during a spotlight session at Insurance Times’s virtual Insurance2025 event this week, Reid told content director Saxon East that where MGAs will become “attractive to consolidators” is to “back up the specialist business that they’ve written”.
He explained: “We all expected a huge amount of consolidation within the MGA world – and hey, it might come – but the issue with MGAs is, particularly post-Covid, that a lot of insurers have felt that perhaps they haven’t been as tight with allowing policy wordings going out to these MGAs and capacity is being a lot more choosy.
“Writing an SME policy in an MGA seems absolutely daft when the insurer has spent so much on their own brand, etc – what is the extra value?
“Where MGAs will score and where consolidation will happen and where it’s attractive to consolidators is to back up the specialist business they’ve written.
“If you’ve got a specialist scheme in a certain area, it makes sense to have capacity to back it up if you’ve got the ability to run an MGA completely separate to the business you’ve got - it gives you one more bite of the cherry on the way through.”
Reid added that one reason why MGA consolidation “hasn’t happened at the moment to a great extent” is because “quite a few MGAs will be struggling with the renewal of capacity at the same terms that they had before”.
He believes this is because “Covid has highlighted that perhaps the discipline in giving that capacity hasn’t been quite what it should have been over the past few years”.
In comparison, broker consolidation has escalated over the last 12 months.
“Isn’t it amazing [that] in the last two weeks, we’ve seen consolidators in the UK buying businesses in the US, in Ireland, in Europe. We’ve seen consolidators getting involved in areas that they haven’t been involved in,” Reid added.
Insurance2025: Commercial Lines Keynotes, 2021
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‘Choosy’ capacity post-Covid could hit MGA consolidation