14 June 2023

Despite headwinds in some other areas of the P&C insurance sector, the outlook for MGAs remains strong, amid growing demand for niche and specialty products and a continued influx of underwriting talent drawn from traditional carriers.

Those were the views of executives taking part in Program Manager’s New York roundtable last month on the eve of our 2023 conference and awards.

Participants were almost uniformly upbeat on the prospects for a segment of the market that has seen double-digit growth for several years in a row, fuelled by a range of cyclical and secular factors.

“I’m bullish,” said Brian Cohen, CEO at Arden Insurance Services. “I think this is actually a great time to be an MGA because the market is hard and traditional markets aren’t responding with creative solutions for their customer base. So if you focus on a niche, and respond quickly to that particular market’s insurance needs, you can effectively compete against much larger carrier competitors.”

And the former Farmers senior executive said he believes there are better times ahead for the sector.

“One of the reasons for that is MGAs are starting to win the fight for talent. When I started my MGA, trying to recruit someone from an established carrier to come and work at an MGA was very challenging. But today the vision I can share with a potential candidate excites them and they want to come and work in much more of an entrepreneurial environment,” he commented.

As previously reported by this publication, there has been a significant shift in recent years in the perception of the MGA sector as it has matured and professionalised.

That – along with strong investor interest in backing MGAs – has created an environment where underwriters are finding attractive opportunities that reward them in ways that often would not be possible at a traditional insurance company.

Rewards for putting in sweat equity

Participants at the roundtable talked about the significant value proposition an MGU or MGA can offer to talent.

For distribution partners and insureds the sector can provide better solutions to some of the biggest problems, typically outperforming peers, including in many cases big insurance companies, because of its ability to use technology and “think outside the box”, they suggested.

MGAs are seen as paying for performance with the ability to provide greater rewards on that basis for those willing to put in the “sweat equity”, as one participant put it, while they can also be attractive for talent because of their nimbleness and appetite for collaboration.

Beat Capital Partners Americas CEO April Galda Joyce said the migration of talent is likely to have sped up as a consequence of the pandemic, in common with what has been seen in the wider jobs market in the US and elsewhere – as well as the recognition among underwriters of the opportunities that MGAs offer.

She added: “If I’m an amazing underwriter, do I want to subsidise other parts of the business [at a traditional carrier], or do I want to be part of an organisation where I feel I’m really getting rewarded for what I do.”

Hybrid fronting carriers around the table said it is not just MGAs that are attracting quality talent.

Everspan’s general counsel and chief compliance officer Nicholas Scott suggested that talent in the sector is looking for what he described as the three Cs: culture, control and compensation.

“They want a culture that makes them feel valued for the work they’re doing with camaraderie; they want control of their destiny and to see that their actions have meaningful impact and import; and with compensation, people want to be rewarded for their efforts.

“You see that on the MGA side and you see that increasingly at carriers that are empowering MGAs and are able to run lean and nimble, incentivising their employees to earn their rewards,” he commented.

Specialty and reinsurance

Other speakers in the roundtable discussion highlighted other factors that will continue to fuel the sector’s growth trajectory.

MS Transverse CEO Erik Matson pointed to the specialty nature of much of the business written by MGAs.

“Where do we sit? It’s specialty. If you think about what’s happening in the world, everything is getting more specialised, so it’s a natural match,” he suggested.

He highlighted the growing size of the market, which is already estimated at more than $100bn of premium in the US and another $40bn to $60bn in Europe, the UK and Middle East.

Desmond Bohan, the managing director of BMS Re’s newly launched ProLink Solutions division, said a good barometer of the way the MGA sector is viewed is the level of reinsurer support it has seen in recent years, including strong activity involving the ILS market.

“Reinsurance companies are more interested in the MGA space than ever before,” he commented. All the traditional reinsurers – even those that held off for a couple of years – are really pushing forward; collateralised reinsurance is interested; ILS casualty – there’s a lot of alternative capacity coming to the table.

“They see the same things we all see. So as that trend continues I think we’re only going to see more and more growth,” Bohan predicted.

View this article here: https://www.program-manager.com/news/mga-sector-winning-the-race-on-talent-say-pm-panellists/

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