Overseas capacity providers are attracted to the UK market, but especially to businesses that have generous data capabilities
Managing general agents (MGAs) have been told their ability to utilise data to evidence their performance will be vital if they want to deliver a sustainable future.
In an online event hosted by the Managing General Agents’ Association (MGAA), the head of Willis Re’s Alternative Distribution Operation (ADO), Ben Nicholls, said Covid-19 and a tightening of capacity across the market was making the ability for MGAs to access capital ever harder.
He warned that while there was still an appetite from insurers and reinsurers to utilise MGAs, they were demanding more data on which to base their decisions to hand over their capacity.
“Data is now critical and it is so important what you do with that data,” he said. “We are using actuaries and modellers to support our MGAs and we see underwriters now looking for three to five year projections on performance, based on clear data.”
Nicholls said the UK market remained popular with overseas capacity providers.
“We are seeing a real international feel to capacity that wants to support those UK MGAs who can provide great data,” he added.
“It is all about how to access capital and capacity in the most efficient way. We are looking for people to work with those that are investing in these capabilities.”
Nicholls said that the good years of days gone by have been replaced by a harder, tougher market - the time of simple renewals are now firmly in the past.
Change of approach
Lloyd’s focus on the bottom 10% of its poorly performing business has placed pressure on the ability of syndicates to operate - many have therefore looked to change their approach, including re-examining their binding authority agreements.
“It is not just Lloyd’s,” Nicholls added. “The market feeds off each other and we are seeing a tightening of underwriting requirements.
“That is not to say there is not new capacity available. However, after the introductions, the first thing they ask for is a massive data set from the MGA. You have to be able to deliver that data set and capability.
“Yes, there are challenges for the market, but not all the market. MGAs that have the data, have reduced their margins and organised their portfolios are not having those challenges.”
Looking to the future, Nicholls said that commissions will continue to come under pressure and Covid-19, coupled with the hardening market, has squeezed margins.
“Data will be key to a sustainable business model for the future,” he added. “Data is already crucial to what we are doing. What do MGAs need to be good at in this market, data.”
Nicholls said the majority of the market has remained static in terms of its capacity, which has seen the cost of available capacity now increasing, putting further focus on MGA margins.