The specialty program market continues to thrive, with a positive outlook and growth opportunities expected for the year ahead, according to a new survey.
Global risk and reinsurance specialist Guy Carpenter & Co.’s latest Specialty Insurance Program Issuing Carrier Survey analyzes trends and benchmarks across the program administrator and managing general agency (PA/MGA) market.
“Through our nearly decade-long analysis of this market, our goal has been to provide insight into the conditions and sentiments driving program carriers in this vibrant market segment,” said Bill Harris, managing director of specialty programs at Guy Carpenter.
“As account premiums and program sizes shrink, program carriers appreciate the need to be more flexible in their approach to generating revenue,” added Harris. “This year’s survey indicates that program carriers are now considering small programs, larger territorial scopes, startup programs and fronting opportunities in order to grow profitability.”
Respondents represented an even mix of traditional insurance companies that have specialty program operations as well as true specialty insurance carriers.
Fifty percent of respondents to the most recent survey are targeting programs with gross written premiums of $10-$15 million compared with 47 percent in 2012. The percent of respondents targeting programs larger than $15 million (25 percent) rose dramatically, up from 9 percent in the previous survey.
Twenty-five percent of program carriers surveyed want regional-specific programs, down from 41 percent in 2012. Those looking for state-specific programs increased notably to 25 percent from 3 percent over the prior three surveys. National programs have dominated territory preference since 2009, coming in at 50 percent in the current survey.
Sixty-nine percent of respondents have an interest in growing through acquisitions, up from 44 percent in 2012. The vast majority of respondents intend to use company funds or stock to make acquisitions (81 percent vs. 47 percent in 2012). Despite access to bank financing, private equity and venture capital options, respondents showed no interest in employing those financial vehicles.
Asked about the types of acquisitions they are seeking, most respondents appear interested in acquiring either PA/MGA firms (63 percent) or teams of people (32 percent). Interest in carriers buying other insurance carriers remained relatively unchanged at 19 percent.
Other key findings from this year’s survey include: