The MGA Market Is Back, Confident and Ready to Expand

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Having weathered the pandemic of 2020 and a Lloyd’s review of low performing syndicates, managing general agents and their insurer partners are in good spirits and expressing optimism about the business opportunities ahead.

Despite the pandemic, confidence is recovering fast in the MGA market, according to a survey this summer with more than 50 insurers and MGAs in by global law firm Clyde & Co.

According to the firm’s report, 2021: A year of renewal for MGAs?, several factors are driving MGA confidence. The most dominant is that many MGAs have not only survived but thrived following the highly testing conditions triggered by the Lloyd’s Decile 10 reform programme and compounded by the pandemic.

James Cooper, head of Insurance at Clyde & Co., said the survey shows that MGA “confidence has staged a significant recovery from its pandemic low in 2020 and is at its highest level in three years, with over two-thirds of businesses expecting to expand carrier partnerships in 2022.”

Clyde & Co. Survey Findings:

  • 69% of MGAs and 33% of carriers expect partnerships to increase in 2022
  • 84% of MGAs say impact of Covid on capacity has been neutral or positive compared to 74% of carriers
  • 80% of carriers and 56% of MGAs say the pandemic has increased focus on policy wordings

The report shows the impact of Covid-19 on capacity has not been long lasting for the industry. While carriers remain cautious about expanding the number of partnerships in this space, sentiment is definitely improving. Eighty-four percent (84%) of MGAs said the impact has been neutral or positive compared with 74% of carriers that feel the same way, a distinct improvement on last year, according to Clyde associates.

Cooper added that while the market is not yet back to normal in terms of capacity availability for MGAs, it is “already clear that Covid-19 has not precipitated a widescale insurance disaster” and an “economic Armageddon has not materialised and confidence among the carrier and MGA community has improved.”

Enthusiasm for Lloyd’s

Popularity of the Lloyd’s market for MGA business was waning when the same research was conducted in 2019 and 2020, mostly due to the impact of the Decile 10 remediation process. However, 2021 has seen a significant reversal. The market is more popular than ever before with 47% of carriers believing that it provides the best environment in which to grow and develop MGA business, versus only 12% last year.

Lloyd’s Underlying Underwriting Results See ‘Huge Improvement’ Despite COVID Losses

The appeal is more muted for MGAs with 20% favouring Lloyd’s, but that is still an improvement of three percentage points on last year.

The change in fortune for Lloyd’s is partly due to the changes initiated as part of the Lloyd’s Blueprint reforms as well as the arrival of the harder market and appetite to write more business,” said Cooper. “This enthusiasm for Lloyd’s is positive for its business and for brokers and their customers in terms of choice.”

Appeal for U.S. and Europe

According to Vikram Sidhu, partner in Clyde & Co’s New York office, there is significant activity happening in the MGA space in the U.S. “It remains the world’s biggest insurance market, and the economy has been improving steadily this year despite the ongoing pandemic. There are opportunities for a range of players from traditional MGAs to insurtech startups,” Sidhu noted.

Interest in the European market has also increased this year with 13% of carriers identifying Europe as a growth market compared to only 6% last year. Also, 9% of MGAs think that Europe is the best market for growth. Cooper predicts there is likely to be “more positive sentiment” in the new year as the sector is seeing an influx of capital and talent and there are more MGAs forming and interest in investment or even mergers.

Challenges Ahead

The survey shows that while the impact of the pandemic has been limited in terms of capacity, it has highlighted some coverage issues. A sizable 80% of carriers and 56% of MGAs have said that focus on wordings has increased following the pandemic.

Claims also seems to be an area of focus. Some 87% of carriers and 67% of MGAs think the process needs improvement. Options including faster communications, clearer processes and automation of lower value claims all attracted support from survey respondents.

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“As we move forward there is likely to be enhanced scrutiny over wordings, more focus on due diligence when onboarding new relationships and greater attention paid to claims performance,” said Cooper.

He said that while the survey indicates the industry believes there is still work that remains to be done, it is also clear that markets including Lloyd’s are” receptive and opportunities are there for the MGAs that can deliver.”

Clyde & Co used an online survey to gather the views of carriers and MGAs operating in the Lloyd’s and London markets in in July and August 2021, followed by interviews with market participants including the leadership and members of the MGAA. Over 50 MGAs and carriers participated in the survey.

Source: MGA Opinion Report 2021: A year of renewal for MGAs?

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