At nearly 12% of commercial lines premiums, Managing General Agents are a growing distribution channel for insurers, according to a new study and survey findings from global management investment firm Conning. MGA-sourced premium exceeded $33 billion in 2014, an increase from the nearly $26 billion Conning reported for 2012.
In fact, the study, “Managing General Agents: Superior Growth in Specialty Markets,” says that MGA growth has outpaced that of the commercial lines sector in 2014, despite softening rates in several lines.
Several factors mitigate rate-induced weakening of premium growth, “including a continued shift by insurers toward specialization and their demand for alternative distribution sources to access the customer,” says Bill Broomall, assistant vice president, Insurance Research.
Conning says that this continued growth is sustainable, as specialty markets are attractive revenue opportunities for insurers. However, they will assume certain risks as part of their relationship with MGAs—most notably, granting underwriting authority (“giving away the pen”).
Premiums sourced through MGAs also come with certain expenses, such as commissions or profit share, and are higher than other distribution options.
State of the Market
Conning’s database indicates that 70% of MGAS underwrite commercial risk premiums. General liability, commercial multiperil, marine (inland and ocean), and commercial auto are the most frequently offered coverages.
Both the number of MGAs and the number of relationships that MGAs have with insurers increased in 2013 and 2014. Conning attributes this increase to the nonaffiliated (MGAs not owned primarily by an insurer) market, where nonaffiliates represent more than 75% of its database, and about 70% of its relationships.
Survey respondents have a relationship with 63 different insurers—and 25 of those insurers have a relationship with multiple survey repondents.
There is no question that more insurers are entering the MGA arena, but this brings the challenge of how to overcome its popularity. Distributors welcome greater competition for quality MGAs and programs who can best serve this market, the study says.
Conning reports a positive relationship between the number of programs that respondents offer, and the size of those premiums. They survey found an even split between the number of respondents who offer five or more programs, and those that offer one to three. Close to 75% say that the size of their largest program is $10 million or more, and 35% report premium of $50 million or more in their largest program.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
