MGAs offer solutions commercial and consumer markets struggle to fulfil: Sparke Helmore partner
Global Insurance Law Connect (GILC)’s new report titled “Innovation abounds: opportunities for growth in the global MGA market” discusses the growing use of managing general agents (MGAs) across 18 countries and the applicable regulatory landscape for each jurisdiction.
“Despite some recent predictions that the MGA market would soon become saturated, GILC’s 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,” said Gillian Davidson, chair of GILC and partner at Sparke Helmore, in a media release.
The report revealed that MGAs are used in different ways around the globe, with large insurers in some markets utilising them to fuel further innovation or to showcase and support outsourcing models for claims and distribution. Certain markets use MGAs to fill capacity gaps and to introduce niche underwriting ideas, the report found.
In some markets, MGAs can provide insurance and reinsurance capacity in niche and emerging lines, considering that underwriting agencies have the specialist knowledge to respond to market demand more swiftly than traditional carriers, the report explained.
“Essentially, MGAs serve as an informal zone for more experimental products and ideas worldwide,” Davidson said in Sparke Helmore’s media release. “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.”
The report identified the Australian MGA market as especially innovative. MGAs, which are known as underwriting agencies in this country’s market, require an Australian financial services licence to carry on their financial services business, the report stated.
In Australia, the broker market is concentrated within a number of the biggest companies, given the consolidation of the intermediary space, the report said. Larger broking networks increasingly offer back-office services such as research, agent training, and computer software, while smaller agents dealing with clients pay for the service fees, sometimes via shared commissions, the report added.
The report also found potential for growth of the Australian MGA market in the areas involving trade associations and professional indemnity and public liability bodies. The mutuals self-insure the first layer deductible then insure the upper layers using more traditional insurance markets via MGAs, the report said.
“There is a growing role for MGAs in the Australian market as risk advisors and underwriting experts, in addition to placing risks,” Davidson said in the media release.
Those interested in learning more about this research can read the report in full.
