With more than 1,000 managing general agents writing roughly $70 billion in direct premiums last year, researchers at Conning believe one growth driver is the fact that the MGA model attracts talent.
Conning listed the talent edge as one of several factors fueling growth in the investment firm’s ninth annual study of the property/casualty program business market titled, “Managing General Agents: Firing on All Cylinders.”
Reinsurers’ attraction to the market—and their pullback in peak-zone catastrophe capacity—are also contributing factors, the report says.
Describing the talent factor as “hard to quantify,” the report says there is an “inherent appeal of the MGA model to talent in a post-pandemic world.” With workers across the U.S. economy reassessing priorities and life goals, and joining the movement that came to be known as “The Great Resignation,” the report suggests that “the more flexible business model of MGAs, and crucially, the greater sense of agency felt by people working at smaller and more nimble organizations may have contributed significantly to the allure of MGAs in competing for talent.”
A Tech Edge?
In particular, the report says technology talent may be gravitating toward MGAs, adding that tech-enabled MGAs are structured so that insurance and tech professionals collaborate with one another, instead of insurance professionals running the show. MGAs also tend to be less burdened with legacy systems and “inefficient and disruptive processes” than traditional carriers—making them more attractive to data scientists and software developers.
To gather information for the report, Conning analyzed statutory filings and conducted a survey of MGAs, MGUs and program administrators. Technology at MGAs was among the survey topics, and Conning reported that 70 percent of respondents agreed with the statement, “We use data analytics at my firm today in a way that wouldn’t have been possible five years ago.”
In addition, 63 percent said they were satisfied that their tech investments are strong, while just 17 percent said they feared they weren’t investing enough in technology. In contrast, in 2018, nearly half—46 percent—said they were underinvesting in tech.
“MGAs now serve as an all-weather distribution channel, as valuable to insurers in hard markets (such as we are now seeing) as in soft markets,” the report’s executive summary says, after summarizing the several figures from Conning’s analysis:
- Insurers recorded $56 billion of 2021 direct premiums written in statutory filings, a 15.5 percent jump over 2020. The overall P/C market grew only 9.6 percent in 2021, and the E&S market overall soared 27.4 percent.
- Adding an estimate for smaller MGAs producing premiums that aren’t included in statutory filings, and $7.1 billion of premiums from U.S. MGAs for Lloyd’s, the estimated total direct written premiums for U.S. MGAs comes to $70 billion. (For statutory reporting purposes, each insurer is required to report MGA premium for MGAs responsible for producing at least five percent of the insurer’s surplus)
- More than 700 MGAs were identified from statutory filings, with roughly 350 small MGAs estimated to fall below the filing threshold.
- There are now more than 20 fronting insurers working with the MGA market.
Identifying the fronting carrier explosion as a supply-side growth driver of the MGA market, Conning reports that support of the fronting market has been an easy road to growth for reinsurers. With most of the 20 fronting carriers retaining some risk through a “hybrid front” structure, reinsurers have greater comfort in supporting these entities, the report says.
Also fueling growth are private equity investors supporting tech-enabled MGAs and innovative MGAs supporting volatile markets like cyber, flood, hail and wildfire, the report says.