MGAs told you have to deliver a difference

As the appetite for Managing General Agents (MGA) continues, a senior member of a global insurance consultancy has said that those behind the new MGA ventures have to deliver something different.

Speaking as delegates arrived in Monaco for the opening of the 63rdannual Reinsurance Rendezvous, Head of the EMEA Region at Xceedance, Justin Davies (above), said in his experience MGAs must find a differentiator.

“The interest in the MGA sector remains steady, but there are lessons that can be learned for those who are looking to form their own underwriting agency,” he explained. “You might be a highly experienced and talented underwriter or broker and believe that, for a variety of reasons, you would be better served within your own MGA.

“However, you set up the MGA and find that you are offering the same product as the major insurance companies and you end up having to fight for business against them and the infrastructure they can put behind their enterprise.

“In such cases a client may often go with the bigger entity so you need to deliver something different. This may well be a product or class of business that is not available, or it may be an operating platform or distribution system that enhances efficiency and reduces cost, meaning those lower margins can be passed on to the client.”

Mr. Davies said reinsurers continue to look to the MGA sector for opportunities to deploy capital, and the overcapacity in the reinsurance market impacts the ability to drive rate increases.

“Again, the issue is one of being able to stand out from your peers,” added Mr. Davies. “We have been working with a number of MGAs to create functional structures that can use intelligent technology and state-of-the art systems to reduce operating costs.

“We have created a modern quote /bind policy administration platform, and in one client’s deployment, it provides the ability to handle 50,000-60,000 policies with a staff of 12. In a traditional MGA, the same conditions may well require more than 150 people.

“This deployment not only highlights the benefits such systems can deliver, but also creates a compelling narrative for emerging MGAs to discuss with capital providers.”