All MGAs are different, with divergent needs and business models, however they also have a number of shared challenges as our recent survey identified. Before drilling down into the MGAs key business challenges, it is important to understand what they see as the most important partnership factors with an insurer providing the risk capital.

The quality and longevity of the relationship between an MGA and their capacity provider was, unsurprisingly, confirmed as being the top priority. Next up was the need for a two-way, open, and transparent dialogue followed by a wish for the capacity provider to have a clear understanding of the MGAs business operations and strategy. Interestingly, levels of commission and profit-share, although financially critical, were ranked as fifth most important with compliance support classed of least importance.

These headline findings echo the fundamental basis of the delegated model. The desire by both MGAs and capacity providers such as HDI Global Specialty for the establishment of long-term partnerships, built on trust, transparency, and the consistent delivery of underwriting performance. Not only is finding new capacity providers for MGAs a protracted and resource intensive process, but longer-term relationships bring additional benefits to both parties.

Looking through the MGA lens

The HDI Global Specialty Survey, containing qualitative and qualitative questions, provided a wealth of data regarding MGA service and operational requirements, how data is acquired and utilised, claims administration practices and future business challenges.

The dominant business challenge reported by our MGAs stemmed from the constant threat of market competition. Competition from insurers, existing and newly formed MGAs, broker distribution channels, developing technologies and changing customer demands. In the UK, the growing membership of the Managing General Agents’ Association is evidence of the continuing attractiveness of the MGA underwriting model. This unrelenting competitive marketplace is a real driver for MGAs, compelling them toward continual improvement - despite often limited resources – and helps explains why the MGA sector is such a dynamic and innovative one.

The second key business challenge was one central l to the whole MGA business model - capacity availability and utilisation. This was followed by the need to continually understand and address a changing regulatory climate and its associated costs.

Increasing claims costs and claims administration charges were ranked as the fourth main concern., The impact of Covid-19 was only ranked as fifth, perhaps underling the resilience of MGA operational structures and agility of working practices. It was interesting to note that MGAs assessed underwriting profitability and the need to apply new technologies toward the bottom end of their numerous business challenges, an indication of confidence in their skills and experience necessary to successfully underwrite risk and operate appropriate technologies.

A question of service

The survey also explored additional MGA service requirements outside of capacity provision. The majority of MGAs recognised support for new product development and opportunities for expanding into new territories as critical needs. Other service requirements were identified as the provision of wider market insights and technical publications, actuarial assistance, and improved data feedback loops. HDI Global Specialty has a full suite of service capabilities to offer our clients in support of their growth aspirations and competitive position.

No one size fits all

The survey also highlighted how the relative size of MGAs, the length of their relationship with HDI Global Specialty and geographical location shapes their priorities. For example, smaller MGAs require relatively more support with data analysis and actuarial services; medium sized MGA’s place greater value onto process efficiencies, claim administration and policy wording support, whereas larger MGAs derive more benefit from insurer financial strength and profit sharing than their smaller peers.

Those MGAs who have recently entered into partnership with HDI Global Specialty identified a broader range of service needs whereas our longer established relationships have a relatively higher focus toward underwriting mandate and utilisation of our S & P ‘A+’ financial rating.

This is only a snapshot of the full survey results which have certainly given us some food for thought into how and where we will look to invest our energy and resources going forward. HDI Global Specialty is committed to the delegated model, endeavouring to continually improve our service proposition in addressing our MGAs changing needs. The results have further thrown new light onto the key issues troubling MGAs and provided us with deeper insights into their unique and evolving businesses.