US MGA market growth beats P&C industry: Conning

The US managing general agent and programme market growth in 2016 exceeded that of the total property-casualty market by 32 percent, according to a new study by Conning, an investment firm.

“In 2016, comparable firms in Conning’s MGA database grew by 4.9 percent compared to 3.7 percent for the property-casualty market overall,” said Matt Sternat, vice president, insurance research at Conning.

Conning analysis estimates property/casualty MGA premiums of at least $42.4 billion written in 2016.

“However, that growth is down significantly from prior year, as the ongoing soft market has affected the property-casualty industry, especially commercial lines. The new entrants to the market are exacerbating the issue, as they are aggressively pricing business and competing for attractive programs.”

The ongoing soft market, especially for commercial lines, has taken some of the wind out of the program market’s sails, according to the report. The growth of 4.9 percent in 2016 is down from the 8.1 percent growth achieved in 2015, and there are emerging signals of trouble ahead, the analysts noted.

“In the past year we have seen insurer exits from the market and reduced risk appetites primarily due to the poor performance in certain lines, led by commercial auto,” said Steve Webersen, head of insurance research at Conning.

Several insurers have exited certain program markets due to struggling lines, such as commercial auto, and many have decided to reduce writings in certain lines. These actions have spawned a new wave of program administrators and MGAs needing to seek replacement insurer partners.

Webersen noted: “We have also seen the emergence of significant new insurer-MGA partnerships, new programs, and continued strong MGA mergers and acquisitions activity. Looking forward, there is no easing to either the soft pricing market or overcapacity, so seasoned MGA’s and program market insurers that have managed through cycles in the past will be best positioned for success.”

Pressures on insurers’ expenses and need for growth continue to drive demand for the MGA/program market. Rate pressures linger, and growth is at a premium. The MGA business model is still one of the most efficient ways for insurers to enter new markets and expand their reach. Seasoned, experienced MGAs, especially those with profitable track records, are sought after and retained as partners. The program market still shines and presents one of a few dwindling areas for growth.

The Conning study, “Property-Casualty Managing General Agents: Growth Continues, but No Escape from the Soft Market” presents the MGA marketplace dynamics, trends, players and outlook. Conning’s proprietary MGA database includes information on almost 650 current and unique MGAs and more than 200 insurers that actively use the MGA channel.

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