Key role for major reinsurers
The industry’s leading firms are making inroads into the thriving MGA sector
Reinsurers have moved from being background providers of capacity to becoming key players in the continued expansion of managing general agents in Europe and America. Many veterans of the MGA market comment on how, just a few years ago, you never saw reinsurers at MGA market events, but now they seem to be everywhere.
For the large reinsurers, a common route into the MGA sector is by working in partnership with fronting companies. One example is Swiss Re and Malta-domiciled Accelerant, which started operations back in 2018.
It is this sort of relationship that is driving growth, according to a recent report from investment management firm Conning, titled ‘Managing general agents: Firing on all cylinders’.
“Fronting companies today play a critical role in securing capacity for MGAs, and we expect this to continue to grow,” says William Pitt, Conning’s director of insurance research and consulting.
“Most of these fronting companies retain a portion of the risks themselves to ensure their interests are aligned with those of their reinsurers. We have also seen a number of the larger MGAs become risk-bearing entities themselves through the establishment of reinsurance captives.”
This is a view endorsed by Greg Williams, a senior director at AM Best. “The reinsurers are supportive as the sector is producing the results. They are trying to get closer to the risk through different fronting arrangements as well as looking at opportunities to participate in the risks,” he says.
Along with exploiting opportunities for fronting arrangements, Swiss Re has established a series of specialist relationships to reach niche markets. These include teaming up with high-end car manufacturer Daimler to launch Movinx, an MGA based in Berlin. Other partnerships have seen the reinsurer move into cyber insurance with Coalition.
The provision of a broad range of risk management and support services is a common feature of reinsurer-backed MGAs.
Munich Re, through a speciality insurance services division, backs Westport, Connecticut-based Insight Risk. The MGA sets out to be a one-stop loss prevention and risk financing solution to reduce the frequency and severity of losses from water damage for building contractors by combining Internet of Things technology, insurance cover and proactive risk management.
Munich Re is also behind the expansion of Dual, the international underwriting arm of Howden Group, via Munich Re Syndicate Limited (Syndicate 457 at Lloyd’s). Earlier this year, Dual hired a team of 11 veteran underwriters and a claims professional, all from Swiss Re Corporate Solutions, to launch crisis management cover offering insurance for product recall and contaminated products.