2019: Managing General Agents - The Super Model of the Insurance Industry
Conning’s annual Strategic Study of the program market incorporates findings from analysis of Conning’s proprietary MGA data set as well as our market survey of MGA/MGU/PA principals to assess: program market size and growth statistics, major insurers with their historical MGA premium trends and MGA relationships both affiliated and nonaffiliated, M&A activity in the sector, and emerging trends. The growing use of fronting companies, new product development and new formations are also reviewed. Findings are bolstered with commentary from in-depth interviews with MGA executives and insurer program leaders.
2. Executive Summary
3. Overall 2018 MGA Market Size & Growth Dynamics
- Program Business Is a Sizable Market
- Mix of Premium by Affiliation Type
- Mix of Premium by Line of Business
- Growing MGA Market Premium
- MGA Count Growth
- Growth Is Expected to Continue
4. Insurers’ Involvement in the MGA Market
- Large Insurer Interest
- Concentration of MGA Premium
- Insurers Using Nonaffiliated MGAs
- Insurers Using Affiliated MGAs
- Market Movement
5. MGA Premium Trends
- Nonaffiliated MGAs
- Affiliated MGAs
- Authorities Granted to MGAs from Insurers
6. Conning’s MGA and Program Market Survey
- Detailed Survey Findings
7. The Insurance Distribution M&A Frenzy Continues
- MGA Demand Remains High
- Insurers’ Fascination with MGAs
- M&A Outlook
8. Compression of the Insurance Value Chain: Fronting, Transformers, and Alternative Capital
- The Transformer Model
- New Fronting Entrants
- Fronting Model Challenges
- Legacy Fronting Insurers (Mainly) in Expansion Mode
9. New Programs, New MGAs, Platforms, and Incubators
- Programs for New and Emerging Risks
- New MGA Formations, Platforms, and Incubators
A. Methodology and Definition of MGA Premium Analysis
B. Overview of the MGA Market
C. Conning MGA Dataset
This is Conning’s sixth annual study on the property-casualty program business market. Conning includes the following in its property-casualty program business universe: (1) MGAs (managing general agents), (2) MGUs (managing general underwriters), (3) wholesalers, and (4) PAs program administrators. We analyze 2018 reported results for this group along with related M&A (merger and acquisition) activity from January 2018 to April 2019.
One key observation from this year’s study is that the MGA model is growing in popularity and influence within the property-casualty insurance sector. MGAs are proving versatile, capable of taking on multiple links in the insurance value chain, and they are avidly sought after as MGA targets. MGA M&A activity is being driven by many constituencies. Intermediaries are the most active on the MGA acquisition front. In addition, the segment continues to be a focus for private equity investors, and brand-name insurers have made several large acquisitions in the past two years.
Incubators for MGAs are emerging, and many startups are thriving. The MGA, more than ever, is a preferred model in the property-casualty world, taking on many forms. Since our previous MGA study was published in 2018, there has been an increase in InsurTech entities, MGAs-in-a-Box, and fronting arrangements that use MGAs as vehicles to pass risk to third-party capital providers.
Conning’s MGA analysis includes a variety of program market topics:
- This study provides a broad market perspective for operators and investors in the insurance program business. It provides a perspective on the nuances of the current state of the market for those looking to initiate new programs or acquire MGAs.
- At the core of the study is an analysis of program sector premium growth trends, underwriting authority, and insurer relationships, including major insurers and their historical program premium, broken out by affiliated and nonaffiliated MGAs. We provide individual MGA premium levels and their insurer relationships.
- The MGA executive perspective is captured within our survey and direct in-depth conversations/interviews. Our online survey of MGA/MGU/PA principals and in-depth interviews with both insurers and MGA owners provide additional perspective and color surrounding market trends.
- M&A activity is fast and furious in the program sector. Conning looks at the sector’s most active buyers and the acquired companies in detail.
- Conning’s outlook for the program sector, including new product development, new entrants, exiting players, and challenges for the industry, is shaped by both our proprietary data and survey findings.
Conning’s estimate of MGA annual premium volume represents the most consistent and verifiable baseline for program premium levels in this difficult-to-quantify market. However, the reader should be aware that public MGA and program data are somewhat limited by current industry reporting requirements. The NAIC (National Association of Insurance Commissioners) reporting regulations require that insurers report individual MGA premium only for those constituting 5% of surplus or more. Thus, our analysis of premium should be considered a floor or lower-end estimate of MGA-related premium, which does not include results and premium for some smaller MGAs.
The program market is a diverse mixture of property-casualty lines of business, industry sectors, and geographies. Often at the forefront of product development, the underwriting expertise and entrepreneurial spirit of MGA owners, underwriters, and administrators continue to deliver above-market growth and innovation to the insurance market. The MGA has become a relied-upon distribution channel for insurers of all types: large nationals, reinsurers, fronting insurers, international markets, and smaller specialty insurers.