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Monte Carlo 2022

Measuring the sector

Crowd from above forming a growth graph

ne of the biggest challenges when reviewing the MGA market is pinning it down

There is such a variety of business models and a rather ill-defined continuum, from broker binders to fully fledged MGAs with pooled underwriting capacity and full authority, that counting and measuring the sector is challenging.

The Managing General Agents’ Association (MGAA) says that there are more than 300 MGAs in the UK and Ireland currently underwriting over 10% of the UK’s £47bn general insurance market premiums and in excess of £6bn GWP worldwide. Measuring the UK MGA market is made more complicated by the diverse mixture of capacity providers and domiciles. Offshore domiciles such as Gibraltar and Malta play a significant part in the UK market, with Gibraltar-based entities, many of them MGAs, accounting for 27% of the UK private motor market.

 The US market is a similar size, according to the latest data collected by AM Best.

Collecting data in the US is slightly easier because there is a degree of uniformity in

regulation, although that is heavily circumscribed with caveats, says the ratings agency. “The basis for our analysis of the US-based DUAE [delegated underwriting authority enterprises] market is the information insurers provide in Note 19 of their annual financial statements filed with the National Association of Insurance Commissioners [NAIC]. Note 19 specifically identifies the MGA through which an insurer has written direct premiums and provides the MGA’s federal employee identification number.”

Note 19, AM Best continues, “identifies whether the contract between the two parties is exclusive, as well as the type of business written, type of authority granted and total direct premium written by the MGA. NAIC reporting regulations for Note 19 require that companies disclose individual MGA premium data only for those MGAs whose premium constitutes more than 5% of the risk-bearing entity’s policyholders’ surplus. Premium data and associated information for MGAs that do not reach the 5% threshold do not need to be reported on Note 19.

“Our aggregated premium total also does not include premium written by Lloyd’s syndicates, which is considerable but is undisclosed. For those reasons, this analysis of MGA premium should not be considered an exhaustive estimate of MGA-produced premium because it

does not include the premium figures for smaller MGAs or individual programs that do not meet the threshold.”

In the UK, the sector is not regulated separately, so the regulatory responsibility is spread among the different partners.

Not only does this make precise measurement of the sector difficult, but that lack of clarity could also weaken consumer protection, according to Mike Keating, chief executive officer of the MGAA.

“The current regulatory regime does not identify MGAs as separate regulated entities,” he says. “It would be a massive benefit to the sector to have some clarity. It could be built around the value chain and how they operate, focusing on fair value and the duty of care to the end customer.”

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