MGAs outperform the wider market on many casualty lines: BMS

US casualty need not be anathema to reinsurers on account of the much-discussed problems around litigation and social inflation. The 2024 renewals will show select managing general agent (MGA)-sourced books outperforming the broad market.

“It depends on the area of casualty you are looking at,” said John Speckman, president of ProLink Solutions, the unit with reinsurance broking group BMS tailored for programme managers.

His contention is that books sourced through specialist niche MGAs can perform better than the wider market. “They’re focused,” Speckman said.

“They are so hyper focused, they are better aware of claims trends occurring in their space, better able to manage against those trends and end up better able to underwrite more specialty into that niche,” he said.

A portfolio backed by MGA claims handling can be handled faster, Speckman said. “You start the process more quickly, you know how to defend against the claim and how to litigate it better,” he said.

ProLink Solutions is pretty sure that programme business will outperform the wider market, on margins being achieved, and growth rate from the $100 billion in third party MGA premium that BMS Re estimates is being written today.

Even with the MGA space, preference goes to some over others. “We gravitate towards those specialists,” Speckman said. “We stay away from the generalists and anyone not laser-focused on their niche.” 

The ProLink strategy is “to home in on the special sauce of a particular MGA so that we are able to better represent them in the market—and find them the reinsurance to back it up”. 

Where is property?

In terms of business placing reinsurance for MGA-sourced books, Speckman claims to like plenty of casualty lines. He names workers’ comp first, general liability second, professional liability, excluding D&O, third. Only then does he name property.

Of workers’ comp, Speckman says he “sees good things there” and assures that “reinsurers will look at that”.

“D&O is the outlier against an otherwise strong professional liability line-up.”

General liability may be “getting a bit crowded” in the MGA world after a lot of launches in the past five years, but Speckman feels it’s still “not very difficult to place reinsurance”.

Property made the ranking of Speckman’s preferred MGA-sourced reinsurance placements only recently as it “starts to turn the corner” following several years of pricing gains to historic highs.

D&O is the outlier against an otherwise strong professional liability line-up, Speckman says. Placing reinsurance in D&O “remains tough” as some reinsurers “freak out when they see rate decreases” irrespective of where loss trend stands.

Commercial auto remains the loser line with placements that remain “very, very difficult”.   

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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