There has been a significant increase in reinsurers’ appetite wanting to specialise in reinsuring insurer’s delegated authority portfolios. With both parties aligning their interests they have now effectively become one risk capital partner, a change that Pro MGA Global Solutions (Pro MGS) CEO, Danny Maleary, has seen starting to develop and “long overdue”.
Pro MGS, part of Pro Global, is a Managing General Agency (MGA) incubation partner which provides a platform and services to assist new and developing MGAs, offering a faster and more cost-effective way for them to get up and running.
In conversation with Reinsurance News, Maleary shared his views regarding the current state of the MGA market, as well as the growing changes he has observed are developing in the market involving reinsurers.
“Generally speaking, the MGA market is robust, as robust as I’ve ever known it to be. It continues to be so despite what’s going on in the world, from an economical perspective,” said Maleary.
“I’m seeing a lot of healthy, good quality opportunities, very thought through and measured in their approach. Very data driven, very thoughtful and mindful of delivering profitability to all their key stakeholders. I think that the sector at the moment continues to grow and we’re seeing a continued uptick of opportunity across the globe.
“This is not just in the UK, but also Europe, the US and other territories as well. We’re also finding more and more, perhaps underserved countries, starting to embrace the MGA to enable insurance products to be obtainable by customers. These are exciting times!”
The resilience of MGAs is thanks to their flexibility, Maleary explained, as they have to be nimble and able to change and mirror both what the market and customers want and need.
Over the last five years, he has also seen reinsurers participating more in the creation of MGAs, when traditionally, they would usually not be as involved.
Maleary said: “Lately, when I look at some of my MGA clients, a number of them also have got reinsurance platforms. They’re confident that they have not only created MGAs, the vehicle to deal with the customer, but that they are also creating a reinsurance platform as a follow reinsurer to the lead reinsurer that supports their portfolio which’s being insured by the insurer.
“That has started to drive, I think, a significant appetite from a number of reinsurers wanting to specialise in reinsuring insurer’s delegated authority portfolios. This year in particular, I’ve seen quite a few opportunities where the insurer, with their reinsurer, has come to us with an MGA opportunity.
“So the MGA, the insurer and the reinsurer are all aligned and it’s quite interesting to see how that is starting to develop now, whereas perhaps six or seven years ago it was about just the MGA and the insurer, the reinsurer was over there somewhere, never really getting that involved.”
Maleary believes that this change has happened because reinsurers want to do more business in the delegated authority space.
He noted that, especially towards the end of last year, reinsurers appear to have been stimulated to think a little bit more laterally, and more focused around the world of delegated authority (MGAs) to enable them to think more strategically around what they should be doing with their insurer partner.
“This is quite exciting, because now, for once, I’m in a room not just with my MGA client and the insurer that’s supporting them, but also the reinsurer. So we’re all aligned here in terms of the risk appetite and the quality of data that flows from the MGA through the insurer to the reinsurer,” Maleary explained.
“This real alignment of interest, even though it’s in its early days, is building up. And it’s not that insurers and reinsurers are blending together, but are considered as one risk capital partner.
“As they align they are enabling the MGA to possibly write more business because the reinsurer partner of the insurer that supports the MGA is happy for the insurer to, perhaps, quota share more out to the reinsurer. Therefore to be able to write more business. So I see more reinsurers now talking to me about MGAs.”
By working together as one, reinsurers also bring with them their data and analytical side, with which they have more experience compared to insurers, according to Maleary.
“Averaging years and tens of hundreds of years perhaps, of reinsurance knowledge and data management right at the front end, only enhances probably everyone’s journey. Which is another factor that I see why reinsurers have started to get more and more involved.”
“Therefore, bringing them together as one risk capital partner enhances the MGAs proposition and relevance, and allows all parties to be more successful,” he highlighted.
The CEO added: “Insurers and reinsurers have strong points and weak points, but collectively they are much stronger rather than working as individuals. That is where I’m seeing significant opportunities now which bring significant value-add to the market.
“Historically, the insurer-reinsurer relationship was really geared towards catastrophic type of losses or catastrophe type of businesses. Currently I’m sort of looking at what that was like, and I’m almost seeing a version of that and a reiteration of that in the delegated authority space.
“This is quite refreshing and I do feel that as we go through 2023 and into 2024, even though we are in early stages, I can see more and more of that taking place. I can see the reinsurer playing a much stronger and important part in the delegated authority space than they do today.
Maleary concluded: “Change is happening now, it has been long overdue; and I believe that in the next two to five years this is going to become the norm. Change is also bringing some interesting thought provoking ideas, some great innovations and great entrepreneurialism, and some great partnerships.”