The CEO – Intermediary Services at the Davies Group, Chris Butcher (above) has said the current tough market for MGAs will require those wishing to strike out on their own needing to ensure they have built strong relationship with their potential capacity providers.

Butcher was speaking in Manchester as thousands of brokers, insurers and MGAs attended the annual British Insurance Brokers’ Association (Biba) conference against a backdrop of a tightening market for capacity for delegated business.

“The MGA market is still fairly buoyant but the past 18 months has seen a tightened level of capacity for delegated business and the situation was not improve by the 1/1 renewals,” he explained. “It is a cyclical business and at present the tough conditions are likely to drive further consolidation within the market as scale is becoming increasingly important.”

Butcher explained while there has been a tightening of capacity, there are new players entering the market but from Davies’ point of view none of the MGAs we work with have been forced to exit a business line due to the inability to access capacity. However there has also been a noticeable tightening of terms and conditions as the insurers look to their risk exposures.

When asked what advice he would be giving those looking to launch an MGA at present Butcher replied relationships were becoming ever more important in the battle for capacity.

“I would advise spending increased time with your insurance partner. You need to have a client base you are already working with and build the insurance relationship to ensure the capacity provider is comfortable with what you are seeking to do. We can do the rest, provide the support and the systems.”

He said the growing burden of regulation remains an issue for MGAs.

“Despite the ongoing public statements from the Treasury of a new post-Brexit regulatory environment which will be less onerous as yet we have seen little from the Financial Conduct Authority that points to any easing of the requirements,”  He added.

“The conversations we have had during the event have been varied and with capacity conditions easing in the past three months it has been positive. I have also been able to talk to the insurers around their current and future strategies when it comes to binder and delegated business.”