The MGA market is back, confident and ready to grow

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After resisting the 2020 pandemic and a review by Lloyd’s of underperforming unions, general agents and their insurance partners are in high spirits and expressing optimism about the business opportunities ahead.

Despite the pandemic, confidence is quickly recovering in the MGA market, according to a survey this summer of more than 50 insurers and MGAs by global law firm Clyde & Co.

According to the firm’s report, 2021: A year of renewal for MGAs ?, several factors boost MGA confidence. Most prevalent is that many MGAs have not only survived, but thrived following the very trying conditions triggered by Lloyd’s Decile 10 reform program and made worse by the pandemic.

James Cooper, chief insurance officer at Clyde & Co., said the survey shows that MGA “confidence has seen a significant recovery from its pandemic low in 2020 and is at its highest level in three years, with more two-thirds of companies expecting to expand partnerships with carriers in 2022.

Clyde & Co. survey results:

  • 69% of MGAs and 33% of carriers foresee an increase in partnerships in 2022
  • 84% of MGAs say that the impact of Covid on capacity has been neutral or positive compared to 74% of carriers
  • 80% of carriers and 56% of MGAs say pandemic has placed more emphasis on policy wording

The report shows that the impact of Covid-19 on capacity has not been sustainable for the industry. While carriers remain cautious about increasing the number of partnerships in this space, sentiment is definitely improving. Eighty-four percent (84%) of MGAs said the impact has been neutral or positive, compared to 74% of carriers who feel the same, a marked improvement over last year, according to associates by Clyde.

Cooper added that while the market has yet to return to normal in terms of capacity availability for MGAs, it is “already clear that Covid-19 has not precipitated a large-scale insurance disaster” and an “economic Armageddon has not materialized and trust between the carrier and the MGA community has improved.

Enthusiasm for Lloyd’s

Lloyd’s market popularity for MGA activities was waning when the same research was conducted in 2019 and 2020, mainly due to the impact of the 10 decile remediation process. However, 2021 saw a significant reversal. The market is more popular than ever, with 47% of operators believing it offers the best environment to grow and develop the MGA business, up from just 12% last year.

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The call is more low-key for MGAs with 20% in favor of Lloyd’s, but it still represents a three percentage point improvement over last year.

The change in fortunes for Lloyd’s is in part due to the changes initiated as part of the Lloyd’s Blueprint reforms as well as the arrival of a more difficult market and the appetite to underwrite more business, ”said Cooper. . “This enthusiasm for Lloyd’s is positive for its business and for brokers and their clients in terms of choice.

Call for the United States and Europe

According to Vikram Sidhu, partner of Clyde & Co’s New York office, significant activity is taking place in the MGA space in the United States “It remains the largest insurance market in the world and the economy is improving steadily. this year despite the ongoing pandemic. There are opportunities for a range of players, from traditional MGAs to insurance startups, ”Sidhu noted.

Interest in the European market has also increased this year with 13% of carriers identifying Europe as a growing market compared to just 6% last year. Also, 9% of AGs think that Europe is the best market for growth. Cooper predicts that there will likely be a “more positive sentiment” in the New Year as the industry experiences an influx of capital and talent and there are more MGAs forming and interested in investing or even to mergers.

Challenges ahead

The survey shows that while the impact of the pandemic was limited in terms of capacity, it highlighted some coverage issues. A significant 80% of carriers and 56% of MGAs said the focus on formulations has increased in the wake of the pandemic.

Claims also seem to be an area of ​​interest. Some 87% of carriers and 67% of AGs think the process needs to be improved. The options, including faster communications, clearer processes and the automation of lower value claims, all garnered support from survey respondents.

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“As we move forward, there will likely be a deeper review of wordings, a greater focus on due diligence when onboarding new relationships, and more attention to claims performance,” said Cooper said.

He said that while the survey indicates that the industry believes there is still work to be done, it is also clear that markets, including Lloyd’s, are “receptive and that opportunities exist for MGAs who can. deliver ”.

Clyde & Co used an online survey to collect the views of carriers and MGAs operating in Lloyd’s and London markets in July and August 2021, followed by interviews with market participants, including executives and members of the MGAA. More than 50 AGs and carriers participated in the survey.

Source: MGA Opinion Report 2021: A year of renewal for MGAs?

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