AM Best's Market Segment Report: Importance of UK MGAs Within Insurance Value Chain Grows Despite Capacity Challenges

14 February 2022 —
AM Best has published its new Market Segment Report "Importance of UK MGAs within the Insurance Value Chain Grows Despite Capacity Challenges", which notes that (re)insurers continue to value those MGAs (managing general agents) that provide expertise and distribution in markets they cannot access efficiently on their own.

Hardening underwriting conditions and reduced availability of underwriting capacity are posing challenges for U.K. MGAs, the most common form of delegated underwriting authority enterprise (DUAE) in the United Kingdom, the report from AM Best says.

Despite increased capacity challenges, those MGAs that meet the needs of risk carriers, with regards to profitability and data, are likely to become of increasing importance in the insurance distribution chain, continuing the trend seen over the past decade.

Recognizing the growing importance of DUAEs within the insurance industry, AM Best released a new methodology, "Best's Performance Assessment for Delegated Underwriting Authority Enterprises," which provides a framework for differentiating among these organizations.

Principal findings of the report include the following:

o The number of MGAs in the UK has grown substantially over the past decade, and has coincided with a decline in the number of brokers.

o While the more successful MGAs typically have strong relationships with their insurance partners, the long-term availability of capacity is not guaranteed.

o The hardening market has created significant capacity challenges and concerns for many MGAs in the UK.

o MGAs that provide specialist expertise and efficient distribution, while meeting profitability and data requirements, are likely to remain valued partners.