The insurance market is hardening.
Blame it on natural disasters, the stock market, an uncertain regulatory environment, or all three, but that’s what’s happening.
It might sound a little ominous, and for brokers it can be. It’s been a soft market for years, but now carriers are tightening up their underwriting standards. Formerly voracious risk appetites are stepping away from the buffet.
This makes it increasingly difficult for brokers to place standard commercial risks like property and casualty. As carriers are essentially outsourcing their underwriting, some of those risks are being sent to managing general agents, or MGA’s.
That isn’t the original purpose of the MGA. MGA’s have traditionally been thought of as where to go for hard-to-place risks. Their value to the insurer was in providing this niche expertise.
But as the market hardens, this is changing.
It is also notable that many brokers got these contracts in a soft market. It’s reasonable to assume that insurers — and Lloyd’s — will pull their contracts as soon as the market really turns hard. That could put brokers in a tough spot. They aren’t going to want to go through underwriters again if they don’t have to.
This isn’t the first time this has happened, either.
Ironshore, a Liberty Mutual company, is just one example. Following the 2008 financial crisis, they launched a managing general underwriting agency “to create a vehicle for efficient delivery of reliable capacity through a syndicated partnership platform,” the company explained on their blog. “Ironshore’s MGU model was a deliberate strategy to offer benefits afforded by large insurance carriers aligned with the nimbleness of a Managing General Agency (MGA).”
Today MGAs are again filling that void. That’s good news for brokers, who need solutions and market access.
“Maybe it’s bad loss record or [the insurer is] just changing the profile of its book of business,” CAMGA membership secretary Gary Hirst told Canadian Underwriter. “The brokers struggle to find another standard market insurer to fill that gap and so they are now coming into the MGA market.”
But not all MGA’s will be best positioned to capture value in a hardening market, as Lloyd’s has been pulling contracts and tightening their belts on their distribution partners.
With technology, the MGA’s nimbleness can be amplified. MGA’s are, ultimately, the middle men in the transaction. But in this position they are able to react faster to market changes than standard insurance companies.
Apollo Exchange is able to bring programs to market faster, access more brokers through our Apollo platform, and reduce administrative expenses by automating the process.