The study reveals that 90% of MGAs and 80% of carriers are optimistic about increasing or maintaining their partnerships.
Even as the industry anticipates a surge in claims volume and heightened legal and regulatory scrutiny, the majority of carriers (55%) and MGAs (59%) surveyed stated that the economic environment had a neutral effect on capacity allocation for 2022.
Rob Crossingham, partner at Clyde & Co, expressed confidence in the MGA model and stated that the sector “remains an attractive place to invest.” He cited positive returns for carriers and emphasized the nimbleness and flexibility of MGAs as key factors contributing to their appeal.
Crossingham further highlighted the growth potential for MGAs to expand geographically and diversify their business lines. He noted that MGAs demonstrating a clear and disciplined underwriting strategy are well-positioned to thrive amid ongoing economic uncertainty.
The Role of Technology and Data in MGA Partnerships
According to the report, carriers rank reliance on technology and data for effective risk selection and pricing as their top requirement from MGA partners. Interestingly, 80% of MGAs have invested in technology or insurtech over the past year, compared to 55% of carriers.
Crossingham noted that these substantial technology investments indicate that MGAs are less burdened by legacy systems and processes compared to carriers. This advantageous position bodes well for their ability to meet carrier partners’ requirements.
Anticipated Rise in Regulatory Scrutiny
Both MGAs and carriers participating in the report expect regulatory oversight to intensify in the coming year. Nearly all MGAs surveyed expressed anticipation of increased legal and regulatory scrutiny in 2023. Concerns were also raised regarding potential regulatory barriers that could deter MGA start-ups or hinder existing MGAs from entering new markets.
Crossingham acknowledged the expected increase in regulatory oversight but expressed confidence that improved standards and behaviors within the MGA sector would enhance customer trust.
Claims on the Rise, Talent Shortage a Concern
While confidence remains high among MGAs and carriers, there is also concern about an expected increase in claims frequency over the next 12 months. The survey revealed that 55% of carriers and 46% of MGAs anticipate a rise in claims this year.
Crossingham said that the likelihood of increased claims volume would heighten carriers’ focus on risk selection, disciplined underwriting, and clarity in policy wordings. Contributors to the report also identified a talent shortage as an additional challenge.
The entire insurance market faces a test due to this scarcity, Crossingham said. MGAs will need to leverage their entrepreneurial and nimble nature to attract talent in underwriting and claims roles.
Expansion Plans and Market Diversification
Despite these concerns, the report highlights the industry’s interest in exploring new lines of business and expanding into new territories to diversify operations. Many MGAs see Europe as a potential market for growth.
“MGAs represent a great vehicle for carriers seeking to diversify into new markets or lines of business,” said Crossingham. He noted an increasing appetite for MGAs overseas, particularly in Europe, where they can be set up relatively quickly in most jurisdictions.
Crossingham also mentioned that post-Brexit, interest in MGAs is accelerating as it offers a viable route for writing business in the EU. As the sector matures and develops, he expects even more interest in MGAs from other territories, including the Middle East.
