Managing general agents are extending their reach

Managing general agents (MGAs) have a fiduciary duty to their capital providers and are seen as a natural extension of insurers carrying out many, if not all, the activities insurers complete.

In an interview with Insurance Day, Managing General Agents' Association (MGAA) chief executive, Michael Keating, explains that, traditionally, MGAs are underwriting experts in niche and specialist products serving specific sectors. This has been extended to distribution reach and associated service that insurers are unable to replicate.

“MGAs are an underwriting vehicle acting on behalf of capital to profitably underwrite business. They often act as virtual insurers and deal directly with the broker community or in some product areas, directly with the end consumer,” Keating explains.

“Their underwriting expertise provides insurers with the opportunity to deploy capital into markets where they may not have the expertise, struggle to access, or do not wish to build and invest in their own infrastructure,” he adds.

Keating, who has led the MGAA since September 2020, began his career as an underwriter in the company market. He joined Axa Commercial in 1999 managing their strategic MGA/delegated authority partnerships before progressing to managing director of its personal lines business (excluding direct).

Leaving Axa in 2011, he joined the board at UK General, one of the UK’s largest MGAs, where he took responsibility for the commercial portfolio introducing a targeted UK small regional broker strategy. From 2016, he held executive positions in the broker sector before working with West Hill Capital in launching a new MGA Insuretech start-up, Qlaims.

Increasing confidence

“Going back 20 years or more, MGAs were regarded with caution as they arguably did not protect and deliver for their underwriting capital,” Keating notes. “Fast forward to today and MGAs are highly regarded for their underwriting expertise, entrepreneurial approach, speed to market and now are an integral part of brokers' placing strategy.”

He continues: “Looking ahead, MGAs will continue to innovate on products for customers, deliver cutting-edge technology reducing frictional costs and duplication of activities across the value chain.”

Keating highlights the increasing confidence from capital to partner MGAs as a “very strong endorsement” of the increasing value and underwriting expertise they provide to the sector.

The MGAA has more than 60 insurer members, which underlines this confidence, he says, and this number is growing. MGAs are also regularly reviewing their financial models, he adds, to seek a greater share of the underwriting profit they are generating with the “natural evolution” to explore carrying risk themselves.

"Looking ahead, MGAs will continue to innovate on products for customers, deliver cutting edge technology reducing frictional costs and duplication of activities across the value chain"

^{Michael Keating
Managing General Agents' Association}

If the opportunities for MGAs are product innovation, cutting-edge technology and financial re-engineering, then the challenges will always centre around delivering consistent underwriting profits over the cycle, therefore protecting capital, and successfully navigating a reduction in rate adequacy that will “inevitably emerge”, Keating says.

He explains: “Being agents of their capital, governance is very much centred around insurer compliance. However, MGAs are currently supervised within the intermediary sector which, on occasion, provides challenges as some of the regulatory activities are not relevant to them. Regarding trends, consumer duty, co-manufacturing, fair value, and the recent insurer claims review will all impact the MGA sector.”

Innovation

The quality of MGAs coming to the market is at its highest, he stresses, illustrated by the consistent innovative nuances of product offering for cyber, financial lines, and non-standard property. These are all aimed, he adds, at meeting changing customer requirements.

“The clear differentiation from earlier iterations is the forensic level of data, use of data scientists and rich management information MGAs have at their disposal and deploy into their pricing and risk selection. MGAs do not have legacy system challenges so both the creation and output of critical data provides a competitive advantage,” he says.

On defining a mature MGA, Keating says, if maturity equates to market tenure, then these MGAs have continued to evolve their product offering, capital structure, distribution analysis and development and consistently engaged with their markets to ensure their proposition is ahead of the curve. “MGAs, by nature, never rest on their laurels and constantly look to innovate,” he adds.

MGAs will continue to increase their share of broker or direct consumer's wallets in 2025 and beyond, Keating stresses.

He says: “Their service levels, aligned with product offering, is unmatched, which provides customers with the confidence to both renew and engage with the MGA community on new business. Speed-to-market to meet changing customer needs, face-to-face engagement on difficult risks, one point of contact and access to decision makers with underwriting expertise are only some of the drivers that will fuel profitable growth across all lines.”

As the head of the MGAA, Keating says his call to action for its members is to look after their capacity, since this underpins their business. They should also “stay resilient” to their underwriting principles when facing a reducing rating adequacy environment, he adds.

He concludes: “Fortunately, I have the experience of deploying capital while being at a large UK insurer to MGAs and being a recipient of capital when I ran both commercial and personal lines MGAs for over 12 years. Relentlessly working at the partnership, transparency, addressing challenges quickly, recognising who ultimately pays claims are all takeaways from my time on both sides of the fence.”