Ratings agency AM Best has confirmed that it is maintaining its market segment outlook for the delegated underwriting authority enterprise (DUAE) segment at positive.
The agency has citied the segment’s sustained growth and performance on a global basis, as well as its ongoing ability to address underserved and emerging risks, as two key factors reflecting the positive outlook.
At the same time, Best cited that another additional factor that partly contributes towards the positive outlook is both the technology and talent within the segment that continues to drive innovation.
However, the agency also cites several offsetting factors, which includes the tight capacity that is noticeable for certain risks, as well as the uncertainty looming over the fronting market and the ongoing and evolving economic challenges.
The DUAE segment is still rapidly increasing with opportunity despite capacity constraints, particularly in the property market.
Research from Best clearly shows that DUAEs are expanding their share of premium written across the broader insurance market, while new entrants are also continuing to grow in number.
In addition, the rising number of DUAEs collaborating with insurers to write specialty business is also driving the increase in US property & casualty premium generated by DUAEs overall.
“The DUAE segment is still burgeoning with opportunity despite capacity constraints, specifically in the property market,” said Greg Williams, senior director, AM Best.
“Our research shows that DUAEs are expanding their share of premium written across the broader insurance market, while new entrants keep growing in number.”
Further, Best’s research has also identified 654 managing general agents (MGAs) that generated direct premiums written in the US of more than $65 billion.
Insurance carriers that are seeking organic growth find the direct access DUAEs provide to policyholders to be profitable, noted Best.
The report also highlights how significant growth has occurred with DUAEs forming captives to take part of the business they produce as capacity partners look for greater alignment.
The agency also explained how it has not witnessed a sector-wide pullback of capacity for DUAE sourced business in 2023, and does not expect to see one in 2024 either.
Best also stated that reinsurers were cautious in their deployment of overall capacity at year-end 2022, as well as at mid-year renewals, and even more so regarding the underwriting property risks.
DUAEs active in reinsurance placement also faced similar challenges to primary insurers, such as tightened terms and conditions, increased retentions, reduced limits, and lower ceding commissions.
Looking ahead, Best noted that DUAEs have become a relied-upon distribution channel for insurers of all types and under all market conditions, adding that despite the capacity pressures and macroeconomic challenges, the DUAE segment continues to flourish.
