MGAs: finding and engaging unknown capital providers

For capital providers, the resurgent managing general agent (MGA) space represents an exciting opportunity.

But concerns about backing the wrong MGA or the desire to partner with a particular type of MGA can hinder progress before an MGA even knows they’re interested.

How can MGAs and speculative capital providers connect for a frank exchange of information? And could peer-to-peer networks offer a solution?

“I speak as someone who historically has liked to take the role of making contact with possible capacity providers,” said James Gerry (pictured, left), chairman of MX Underwriting. “A colleague of mine said recently: ‘James, the problem is we don’t know who we don’t know’. The point is that there is continuing development out there, and alternative capacity capital opportunities.”

For MGAs in the dark about how to locate these capital providers, Gerry advocated partnering with an intermediary. Choose one that is knowledgeable and who can introduce the MGA to “a world of opportunity that’s beyond perhaps what they would have naturally thought of as a solution for their future underwriting needs”, he said.

Gerry was speaking as part of an Intelligent Insurer panel titled “MGAs: attracting tentative risk capital providers into the market”. His fellow panel members were Danny Maleary (pictured, centre), chief executive officer of Pro MGA Global Solutions; and Chris Brown (pictured, right), executive vice president at Mosaic Insurance Company; with Claire Churchard, senior editor of Intelligent Insurer, as moderator.

Maleary said there needed to be “clarity of vision” when MGAs and speculative capital providers connect, particularly around delegated authority.

“There’s some uncertainty and cloudiness about what capital providers really want to achieve, and likewise when it comes to some of the MGAs we look at as well. There needs to be more certainty on the vision, on what they want to achieve.”

Open conversations about alignment between the MGA and provider, and the concept of the partnership in general, are also important, he said.

“The MGA sector is flourishing, and I can only see it growing. I can see it becoming more entrepreneurial, with more innovation. It’s an exciting place to be.”

The suggestion of using peer-to-peer networking to aid or facilitate exchanges of information between MGAs and prospective capital providers was, perhaps unsurprisingly, roundly rejected by the panel.

“At what level do you share information? Let’s be honest, we’re trying to gain a competitive advantage within the marketplace,” Gerry said.

“I don’t want to be selfish, I’ve had a lot of involvement over the years with the Managing General Agents’ Association (MGAA) and there are forums and platforms that have a great deal of shared knowledge.”

But he was doubtful about how far that knowledge-sharing should go when dealing in a commercially competitive environment.

“I’d love to say it’s Glasnost, everything is open, we’re free and sharing but I don’t know about that!” he said.
However, Gerry added, in terms of the exchange of information with his prospective capacity providers “there has to be transparency and trust”.

Helping to evolve

Brown said that peer-to-peer networking was great for accelerating the evolution of best practice, which organisations such as the MGAA do extremely well.

But, he said: “When it comes to capital, that’s a very sensitive area because most capital providers will ideally want to back only one horse in a race, whether it’s unique by product or some kind of distribution opportunity. I think people would quite naturally be guarded over capital.”

Maleary echoed his fellow panellists in the main, but added that his firm, which is classed as an intermediary and manages 35 MGAs with a total of $650 million gross written premium, operates peer-to-peer networking between its clients. He explained that this was “more geared towards experiences”.

“I agree with James: it is difficult, it is a competitive landscape. You can’t be everything to everyone, and only a certain type of individual is cut out for it. Peer-to-peer networking for me is about experiences,” he concluded.

For more on MGAs and identifying and allaying capital providers’ concerns watch the full panel discussion on the video in this article and read the sister article to this one.