The global delegated underwriting authority enterprise (DUAE) segment has been assigned a positive outlook by credit rating agency AM Best. Technology, talent and diverse sources of capital continue to drive growth in this channel, the agency added.
According to the announcement, the outlook reflects AM Best’s expectation that this distribution channel will continue to strengthen on growing interest from capacity providers, along with the emergence of specialty expertise.
This initial market segment outlook marks another first for AM Best and the DUAE segment. Earlier this year, AM Best issued its methodology for Best’s Performance Assessment for DUAEs.
“Talent and technology have played a vital role in adding value to this market,” said Greg Williams, senior director, AM Best. “As larger insurance companies struggle with legacy systems and databases, the smaller DUAEs have proven to be agile implementing systems that can perform the risk selection, pricing, and underwriting that are central to insurers’ profitability.”
In addition, AM Best also noted some near-term concerns that could affect this segment, including a potential pullback of capital and risk-bearing capacity, as well as elevated reinsurance costs.
Other detrimental factors include looming economic challenges, including stubbornly elevated inflation that will likely impact underwriting and reserve margins.
The rating agency defines a DUAE as a third party appointed by a re/insurer, through contractual agreements, to perform underwriting, claims handling, and other administrative functions on behalf of its partners.
DUAEs comprise entities such as managing general agents, cover holders, program administrators, program underwriters, underwriting agencies, and appointed representatives.
They are an important distribution channel in the United States for risks not widely accepted by standard carriers, AM Best highlighted, and are increasingly proving their ability to manage emerging risks, including cyber and climate risks.
They are doing this by leveraging their expertise and intelligent use of data, as well as pivoting risk strategies in ways that traditional carriers are not accustomed to, the agency explained.
Additionally, DUAEs have become a relied upon distribution channel for insurers of all types and in all market conditions, with the United Kingdom and London markets being among the most developed in this area outside of the United States, AM Best noted.
