A new report by investment management firm Conning shows that the managing general agent (MGA) market grew swiftly through 2021, fuelled by plentiful reinsurance capacity accessed through fronting insurers.
Premiums sourced by MGAs, a key distribution channel for US property and casualty insurers, grew significantly in 2021 to exceed $70 billion, Conning reports.
This figure includes business written for the account of Lloyd’s syndicates and non-US insurance companies, with growth exceeding what was achieved in the overall P&C market by some distance.
Growth drivers included the strong rebound in the US economy following pandemic-induced lockdowns and a continued broad-based rise in premium rates, Conning found.
Rate rises were particularly strong for some of the more challenging lines of business, notably cyber, that are typically insured in the excess & surplus lines (E&S) market, where MGAs are very active.
Conning also noted that fronting insurers have played a growing role in channelling capital from global reinsurance markets to support MGAs.
“Fronting companies today play a critical role in securing capacity for MGAs, and we expect this to continue to grow,” said William Pitt, a director of insurance research at Conning. “Most of these fronting companies retain a portion of the risks themselves to ensure their interests are aligned with those of their reinsurers. We have also seen a number of the larger MGAs become risk-bearing entities themselves through the establishment of reinsurance captives.”
The Lloyd’s market has historically been the biggest single source of capacity for MGAs in the U.S., and that remained the case in 2021, according to Conning’s latest study.
“The economic rebound that spurred a robust recovery for the economy post Covid-19, boosted the business of MGAs and program administrators, including those that had been hit the hardest by the pandemic,” said Lauryn Kothavale, an Assistant Vice President in Insurance Research at Conning.
“MGAs were historically looked upon by insurers as means to access additional premium in soft markets. But their risk pricing capabilities have expanded and their role in sourcing attractive niche business for insurers in today’s hard market is every bit as important.”
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