Moody’s Ratings, the credit rating agency, has published a report examining the rapid growth of delegated underwriting across global insurance markets and its implications for insurers’ business models, profitability and competitive positioning.
According to Moody’s, delegated underwriters such as managing general agents (MGAs), Lloyd’s cover holders and broker facilities are playing an increasingly significant role in commercial insurance, helping insurers gain access to specialist risks, niche customer segments and new sources of growth.
Moody’s notes that premiums written through MGAs more than doubled between 2020 and 2024, whilst delegated authority business now accounts for around 40% of Lloyd’s premium income.
The agency attributes this growth to rising demand for complex and emerging risks, including cyber, climate-related and political exposures, together with insurers’ growing reliance on specialist underwriting expertise that many mainstream carriers are unable or unwilling to develop in-house.
Delegated underwriting, Moody’s observes, allows insurers to grow, diversify and reach underserved markets without committing significant investment to specialist capabilities of their own.
Broker facilities, meanwhile, are said by Moody’s to provide insurers with efficient access to large and relatively predictable flows of premium income.
However, Moody’s cautions that greater reliance on MGAs and other intermediaries can erode insurers’ profit margins, weaken their underwriting control and gradually shift economic value and customer relationships towards distributors rather than risk carriers.
The report also highlights that increasing private equity investment in the MGA sector could intensify competition, weaken pricing discipline and place further pressure on industry profitability as commercial insurance markets soften. Moody’s Ratings emphasises that strong oversight, governance and risk management frameworks will be essential as insurers become increasingly dependent on third-party underwriting partners.
Moody’s concludes that as commercial insurance markets continue to soften, insurers are likely to expand their use of delegated underwriting arrangements to support growth.
While such models can enhance scale and diversification, Moody’s Ratings warns that insurers relying too heavily on third-party underwriters risk becoming increasingly commoditised capital providers, with intermediaries capturing a growing share of industry profits and customer relationships over time.
