The report found that the use of MGAs varies significantly around the world. In certain markets, MGAs are used to fill capacity gaps and introduce niche underwriting ideas, while in others they can help larger insurers remain innovative or showcase and support outsourcing models for claims and distribution.
Gillian Davidson, Chair of Global Insurance Law Connect and Partner at Sparke Helmore, commented: “Despite some recent predictions that the MGA market would soon become saturated, our research found that it continues to be a rapidly growing market that is increasingly providing solutions the commercial and consumer markets have struggled to fulfil.”
MGAs expected to take-off in less developed markets
The report found that in multiple different ways, MGAs are healthy for the insurance market, and this is reflected in their ongoing growth and expanding geographical spread.
The US remains the largest market for MGAs, while the UK is also experiencing significant growth. The picture across Europe is more variable, with most European markets hosting some type of MGA ecosystem. Many markets are still in the early stages of development, providing opportunities for a future growth surge.
In less-developed markets, MGAs are also being recognised as a useful innovation tool and in some places, growth could be explosive. The wider Asia-Pacific market is expected to be a big growth area for MGAs including in China where MGAs remain in their infancy but are gaining ground in key financial centres. Another secondary market poised for growth is Latin America. While the maturity of the MGA sector varies greatly between markets, Brazil is leading the way with an increased relevance of MGAs in that country.
Risk innovation
Although innovation is widespread, the growth curve for MGAs shows two major themes. MGAs are used in almost every country to support expansion into niche or emerging lines and to bring innovative and cost-effective solutions to the consumer market.
Almost all countries see a growing role for MGAs in emerging and developing markets including in the technology space, and in providing cover for and assessing risks associated with climate change. They also play a role in managing claims in the aftermath of worsening natural catastrophes.
Filling niche capacity gaps
Many consider niche and emerging lines as a natural fit for MGAs to provide insurance and reinsurance capacity. This is due to the specialist underwriting knowledge available within underwriting agencies, allowing them to respond to market demand more quickly than traditional carriers.
Gillian concluded: “Essentially, MGAs serve as an informal zone for more experimental products and ideas worldwide. Their backing by recognised capacity gives them credibility, while their independent management and underwriting allows them to think differently about how to service clients and solve new risk problems, such as how to insure vulnerable properties in the era of climate change. These attributes make them a valuable part of the global insurance ecosystem, attracting an increasing amount of GWP and interest from investors, including private equity.”
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