2021: Managing General Agents - Rising to the Challenge
The managing general agent (MGA) market accounts for a growing share of both commercial and personal lines premium spread over an increasingly large number of insurers. This sector continues to be at the forefront of product, technology, and business model innovation. The MGA structure is typically the business model that InsurTechs choose, and fronting arrangements with insurers are expanding. Using industry-filed data from insurers, as well as Conning’s proprietary survey results, this study will analyze the overall industry, the largest MGAs and insurer partners in this market. Conning will also look at the changing role of MGAs, their influence in today’s insurance market, and what is next in the evolution of the MGA model.
1. Introduction
2. Executive Summary
3. MGAs Rise to the Covid-19 Challenge
² Covid-19 and its Associated Challenges
² Pricing Continues to Harden
² Efficiencies Emerge
² The Talent Pool Expands
² The Torrid M&A Pace Surprisingly Resumes
² Here Comes A.M. Best?
² Outlook for 2021—The Golden Age of MGAs Continues
4. 2020 MGA Market Landscape
² Program Business Continues to Be a Sizable Market
² Mix of Premium by Affiliation Type
² Premium Mix by Line of Business
² Growing MGA Market Premium
² MGA Count Growth
² Growth Should Accelerate in 2021
5. Program Market Insurer Trends
² Significant Insurer Interest
² MGA Premium Concentration
² Insurers Using Nonaffiliated MGAs
² Insurers Using Affiliated MGAs
² Market Movement
6. MGA Premium Trends
² Nonaffiliated MGAs
² Affiliated MGAs
² Crop
² Authorities Granted to MGAs from Insurers
7. Conning’s 2021 MGA and Program Market Survey
² Detailed Survey Findings
8. M&A in the Program Markets
² MGAs and MGUs—Hotter Than Ever
² A Brief (Covid-19) Pause in the Action
² Private Equity Investors Not Deterred
² Valuations Remain at Historical Highs—Even in Covid-19
² Outlook for M&A in 2021 & Beyond
9. The Fronting Model—Expanding & Evolving
² The Market Is Expanding
² Pressure on Fees and Risk Assumption
² What’s Driving Investor Interest?
² The Keys to Success
² Fronting Scorecard—An Updated Look at the Players
Appendix
A. Methodology and Definition of MGA Premium Analysis
B. Overview of the MGA Market
C. Conning MGA Dataset
Introduction
This is Conning’s eighth 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), and (3) PAs (program administrators, also known as program managers). We analyze 2020 reported results for this group as well as related M&A (merger and acquisition) activity in 2021 through April.
Despite the pandemic’s challenges and associated uncertainties, many MGAs and program administrators continued to thrive in 2020. The firming market that started in 2019 has continued throughout 2020 and into 2021, which unquestionably helped mitigate some of the Covid-19 stresses. Insurers were able to achieve organic growth with the help of improved pricing across most lines of business. MGAs, MGUs, and program administrators continued to adapt and grow in an environment where many businesses were shutting down.
As we published last year’s study in mid-2020, the U.S. economy was in virtual freefall. In stark contrast now, the economy is picking up steam as we publish this report. Employers are adding to payrolls, almost frantically in some service businesses, such as entertainment, dining, and retail. This economic recovery and price increases should promote organic growth in 2021. This study explores the status of the MGA, MGU, and program administrator market in 2020 and how it is successfully confronting new challenges brought by Covid-19. As in past Conning MGA market studies, the study is based on three research avenues:
- detailed analysis of the 2020 data reported in statutory filings
- Conning’s annual proprietary MGA market survey
- interviews with industry experts in the MGA world, including MGA principals and program
insurers
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 MGAs constituting 5% or more of an insurer’s surplus. Our analysis of premium should therefore be considered a floor or lower-end estimate of MGA-produced premium, because it does not include premium numbers for many smaller MGAs and individual programs whose business volume does not meet the 5% surplus threshold.
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 program 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.