2023: Managing General Agents - Proving Their Mettle
MGAs saw very strong growth in 2022, well in excess of broader property-casualty insurance market growth. Premium was buoyed by the continuing hardening of many segments of the market and by the continuing availability of underwriting capacity through fronting companies, although the terms on which this capacity is available have been tightening. Meanwhile, MGA premium backed by Lloyd’s syndicates—historically the largest supporter of MGAs in the U.S. market— rose just 2% in 2022 to regain the level it last reached in 2019.
The defining quality of most MGAs is specialization in niche markets, where they have deep understanding of the risks and strong broker relationships. They thus offer insurers, reinsurers, and alternative capital providers “plug and play” opportunities to access such business without making large-scale investments in talent and operations. For this reason, much of the business written by MGAs naturally skews toward the E&S (excess and surplus lines) market where more volatile risks are typically placed. The perceived volatility of many lines of business has increased in recent years, resulting in very large flows of business into the E&S market (which grew 28.8% in 2021 and 17.5% in 2022). MGA premium that flowed through E&S fronting insurers more than doubled in 2022. In the cyber market, too, where MGAs are very active, premium has been flowing much more rapidly into the E&S market than into the admitted market.
The publication of the tenth Strategic Study into the U.S. MGA sector affords an opportunity to examine long-term trends that have reshaped the property-casualty market over the past decade and propelled MGAs into a far more prominent role. The three most important changes, which we explore in this report, are:
- The evolution of a sophisticated ecosystem of largely cloud-based service providers that have made MGAs far easier to launch and scale, while interacting effectively with capacity providers and brokers
- A profound shift in the attractions of MGAs to talented insurance professionals, particularly underwriters, and to the high-quality technology talent that plays an increasingly important role in insurers’ success
- The emergence, over the past five years, of a new generation of hybrid fronting companies that have helped to channel billions of dollars of capacity into the U.S. MGA market
Table of Contents:
- Introduction
- Executive Summary
- Market Overview
- 2022 MGA Market Landscape
- Program Market Insurer Trends
- MGA Premium Trends
- Conning’s 2023 MGA and Program Market Survey
- M&A in the Program Markets
- Fronting Market at an Inflection Point?
Appendix
- Methodology and Definition of MGA Premium Analysis
- Overview of the MGA Market
- Conning MGA Dataset
Introduction
This is Conning’s tenth annual study on the property-casualty program business market. Conning includes the following in its property-casualty program business universe: (1) MGAs (managing general agents), (2) MGUs (managing general underwriters), and (3) PAs (program administrators, also known as program managers). Throughout this study, the term “MGA” is used as a generic term encompassing distribution models in which the distributor acts as the agent of the capital provider. We analyze 2022 reported results for this group as well as related M&A (merger and acquisition) activity in 2023 through March.