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Number of insurer-MGA relationships will hold steady or increase in 2020

Source: Middle East Insurance Review | Nov 2020

Two thirds of carriers and managing general agents (MGAs) polled in a recent survey think the number of insurer-MGA relationships will hold steady or increase in 2020, even in a hardening market, according to international law firm Clyde & Co in a report.
 
The report ‘Proceeding with caution: A survey of MGA and insurance carrier opinion on the state of the MGA sector’ is the second on the MGA market by Clyde & Co. The survey was carried out with more than 100 insurers and MGAs earlier this year.
 
Last year, the first research among MGAs and carriers made it clear that the Lloyd’s market reform programme was having the desired effect. The market, which had been perceived by many as supporting under-performance and inflated costs for far too long, had a sense of increasing caution. 
 
Over two thirds of MGAs and carriers agreed that they were heading into a more competitive environment. A tight focus on quality also meant that capacity was in short supply, and for many small MGAs, Brexit still loomed large.
 
This year’s report, which is based on a survey and interviews with leading insurers and MGAs, provides an update on the state of the market and the insurer-MGA relationship. It looks at the impact of COVID-19 on the sector and the future of London and Lloyd’s as the preferred markets for growing and developing an MGA business.
 
Some findings include:
Proceeding with caution
  • Although 88% of carriers and 83% of MGAs agree that setting up a new MGA will be harder this year, existing players feel secure;
  • 64% of carriers and 66% of MGAs think the number of relationships will hold steady or increase in 2020, even in a hardening market; and 
  • Over half (51%) of carriers say the impact on capital availability will be positive or neutral post-COVID-19.
 
Becoming more demanding
  • Carriers will use MGAs to give access to new markets and provide technical insight and capability;
  • Cost is no longer a top priority for carriers, cited by only 18%;
  • Carriers have three ‘top asks’ of MGAs, cited by over 50% of the sample: access, insight and conduct;
  • MGAs have one outstanding priority — market reputation, cited by 67%; and
  • 96% of carriers and 84% of MGAs believe the shift to electronic placement and data standardisation will accelerate as a result of COVID-19.
 
Lloyd’s reform agenda sees choices crystallising
  • Lloyd’s has become less desirable as a home for developing MGA business over the last year as market reforms take time to bed in.
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