Premiums underwritten by U.S. managing general agencies not affiliated with insurance companies reached $33 billion in 2022, and fronting companies wrote another $13 billion in the same year, a new report says.

Reinsurance broker Howden Tiger and the insurance research group at Conning, a global investment management firm, collaborated on the report, “Travelling Light,” released at the Rendez-Vous de September, over the weekend. The report categorizes MGAs, fronting companies and reciprocal exchanges together as “asset-light insurance structures,” noting that they are not just growing, but that they play a critical role “in ensuring the insurance market remains relevant and responsive, at a time of heightened underwriting and investment volatility.”

According to the report, the $33 billion MGA premium figure, for MGAs not affiliated with insurers, is double the volume placed by these non-affiliated U.S. MGAs in 2018. Overall, Conning estimates that MGAs wrote $85 billion in premium in the U.S. in 2022.

“It is evident that asset-light structures are forging a new frontier, creating new approaches for the industry,” said David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Tiger, in a media statement.

The report notes that catastrophe-exposed risk, in particular, is a “heavy lift” for insurance entities—requiring strong balance sheets—and that the burden of risk has grown across other lines of business also, prompting insurers to seek ways to reduce amounts of capital they are required to hold. Specialized coinsurance arrangements—referred to as “consortia” in the report—are popular approaches to accomplish this in the Lloyd’s market.

But the asset-light structure alternatives have another benefit—that of bringing tech talent into the industry. Conning and Howden Tiger suggest that people skilled in software development and data science are attracted to “the entrepreneurial opportunities presented by MGAs.” (See also, “Are MGAs Winning the Talent War?”)

“Where the talent has led, significant investment has followed, with an influx of non-insurance investors into the insurance market to support tech-enabled asset light businesses, particularly MGAs and, in the U.S., reciprocal exchanges,” the report says. These investors seek returns but they don’t want to take on the volatility associated with “balance sheet insurance businesses.”

Asset-light MGAs have also played a critical role in building the cyber insurance market for small and medium-sized businesses enterprise (SME) space, offering cyber advice, the re.

“Asset-light entities are delivering for brokers and insureds, developing new products for some of the most challenging exposures in today’s market, including cyber risks and property perils impacted by climate change,” said William Pitt, Director, Insurance Research, Conning, in a statement about the report. ” At a time when data analytics are increasingly pivotal, these agile entities can often move faster than traditional carriers, identifying and developing attractive niche markets and offering speedier submission turnarounds”.

The report offers mini-profiles of three MGAs formed in recent years: SageSure, StarFish Specialty and Arden Insurance Services. All three were launched by industry veterans and the report details some of the challenges that each of have overcome to build their businesses.

SageSure, a property-focused MGU founded in 2019, now insures more than 400,000 homes and businesses in 14 coastal states, with more than $1.2 billion, according to the Howden Tiger-Conning report. (SageSure was profiled by Carrier Management in 2020 as well. Related article: “MGU SageSure: A Tech Company Dressed Up in an Insurance Company“)

Starfish Specialty provides builders’ risk coverage for owners and contractors renovating buildings, according to the report. The MGA’s website also lists D&O and crime products for community associations among its offerings.

Arden Insurance offers insurance for condo associations.

The report’s section on fronting describes two models—pure fronting and hybrid fronting—and notes that a rapidly growing cohort of fronts has been channeling billions of dollars of capacity from global reinsurance markets into the MGA sector. According to graphs published in the report, fronted premium sourced through MGAs outstripped Lloyd’s premium sourced through coverholders (Lloyd’s MGA) in both 2021 and 2022 as Lloyd’s moderated the business it is writing through this channel.

As for reciprocal exchanges, referred to in the report as “the most venerable of the structures that form part of the asset-light revolution, Howden-Tiger and Conning discuss the likes of USAA and Erie Insurance, explaining that the attorney-in-fact part of the reciprocal structure (running day-to-day operations) is the capital light part. They also offer the newer examples of Kin Insurance, a direct-to-consumer homeowners writer than began life as an MGA, and SURE, a coastal property reciprocal insurer whose policies are exclusively available through SageSure.