MGA’s
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Transforming insurance: the evolution of MGA’s
Enrico Bertagna, managing director of Bowood Europe, Howden’s specialist delegated binding authority division, highlights the enduring potential of the global MGA market and how it can create opportunities for expansion across the entire industry value chain.
The continental European MGA market has undergone significant changes over the last 20 years – changes that will continue to inspire further growth.
Twenty years ago, the European MGA market was largely dominated by “tied agents”, while the US market thrived with diversified solutions, primarily driven by a more advanced broker market. The change happened when Lloyd’s came to market with an appetite for delegated authority. All this new energy and capacity available was a key driver in the expansion and sophistication of the European market.
In tandem with this, the introduction of true underwriting platforms to the continent, including delegated underwriting authority (DUA), promoted an innovative approach to distribution. Meanwhile, European systems developers began adopting US market standards, such as Acord, and introducing MGA systems to the market according to best practice.
As the market for tied agents in continental Europe began to shrink, they transitioned into multi-agent models, which created opportunities for underwriters to establish their own MGAs. Europe now has more than 300 operators.
Total available gross written premium (GWP) for MGAs in the European market has grown from its original $15bn to be integrated into the much larger $500bn P&C insurance market. Comparatively in the US, MGAs write $50bn in GWP, which is part of a $900bn P&C insurance market. Though a smaller market, European MGAs are growing rapidly, becoming a more significant global industry player.
MGAs’ continued growth
The average size and sophistication of MGAs have increased across the board, positioning them to expand further. Specialised and dedicated third-party administrators present opportunities for MGAs to grow rapidly and integrate their in-house claims capabilities.
Service providers are now offering MGA systems that can be licensed to support the full lifecycle of insurance transactions, including reporting through API technology. MGA incubators are emerging to provide underwriters with the infrastructure to allow for easy and fast entry into the market. Meanwhile, wholesale brokers continue to be opportunistic about placing capacity for MGAs.
The London market continues to play a crucial role in the growth of both the European and UK MGA markets. Lloyd’s and other company markets write approximately 30 percent of the continental business, while the remaining 70 percent is handled by continental carriers, which have become strong players in this space.
Dominant trends
Insurer appetite for MGAs has increased dramatically, with carriers viewing them as an effective alternative distribution channel for quickly entering new product segments and territories. This evolving perspective is supported by Bowood’s inaugural DUA report, which highlights a strong and material appetite for European business.
Additionally, start-up activity in Europe is at all-time high, fuelled by quality underwriters moving to establish MGAs as the model becomes more accepted and better defined. This has paved the way for more creative product development and the emergence of fresh ideas.
Unlike in the US, where MGAs have plenty of fronting options enabling more reinsurance capacity, options in Europe remain limited. This creates an opportunity for further European growth, as US-based players seek to expand and diversify their operations in the region.
Opportunity for success
Howden’s capacity-placing capabilities are designed to leverage experience and resources across the US, Australia, Canada, London and Europe. By applying best practice from its global operations, Bowood Europe supports market development through its comprehensive MGA services, including actuarial services, data structuring and modelling, capital raising and strategic advice.
With the creation of Bowood Europe, Howden Re is bringing a structured and strategic approach to partnering with continental European MGAs. We aim to be a centre of excellence in accelerating the growth and success of the European MGA market. The timing, the state of the market and our own position creates a perfect storm, putting us in a strong position to outpace the market and lead the charge.
This article was first published in The Insurer on 9th September, 2024. Click to view the live article.