At a spirited industry roundtable hosted by Insurance Insider US, executives, investors and underwriters shared candid perspectives on consolidation, capital and innovation within the MGA and MGU market, one of insurance’s fastest-changing sectors.
“This has been an incredible period for MGAs,” said Cem Altuntas, managing director, Guy Carpenter.
“We’ve had significant M&A activity, consolidation and growth in the sector. On the back of this, we have a large and diversified landscape, much more sophisticated platforms, platforms with capabilities across the value chain.
“And I think the MGAs are definitely here to stay. They command more than $100bn in premiums and are an important part of the insurance ecosystem and value chain.”
He noted MGA platforms include those backed by private equity, wholesale and retail brokers, in addition to platforms focused on the incubation business.
“All of this bodes well for the sector to continue to grow. I think we are going to continue to see more diversified growth strategies across M&A, organic growth and a continued focus on incubation opportunities as well.”
Kevin Rehnberg, chairman and CEO of Ascendex, said technology is a major differentiator. AI is finally at the point where it can reduce operating costs and increase efficiency, he said.
“When I was starting this, people were saying, ‘Oh, the MGA space is so crowded.’ And I said, ‘as opposed to what? The six or seven hundred insurance companies?’ So I think there's two key points: it's the underwriting piece and the technology piece – and that's where you can differentiate yourself.”
The MGA evolution has been “amazing”, said Cory Schilling, head of US MGA and program solutions for reinsurance at Aon. “Back in the day, it used to be non-standard auto – and MGAs were an ugly word. Now it’s grown into diversified, global companies with mainstream products.”
From the carrier perspective, alignment of interests was a recurring theme. “Some MGAs come along and understand the potential future opportunity of M&A,” said Ethan Allen, chief program officer at MS Transverse.
“You have to make sure you understand the intentions. Are they optimizing for a near-term exit, or building a durable platform that makes a real difference?”
Incentives matter, said Ryan Armijo, president of Amwins’ underwriting division. “The entrepreneur is not always in it for sustainability, so I think it's driven [by], I don't want to say bad behavior, but you have to be careful of those incentives, that they're aligned for the long term.
“For example, we use profit commissions, and we share those almost pass-through to underwriters. But we shy away from anything that’s ‘eat what you kill.’ We’ve seen that go poorly.”
It’s hard for an independent MGA to be great at everything, Allen said. “But when a major platform brings another MGA under its umbrella, the scale, data and back-office support enhance what that MGA already does.”
As technology has evolved, and the insurance value chain has become much more modular, it’s become easier for a strong underwriter to start their own MGA, Altuntas said. “Technology is more readily available, less expensive, and that’s driven entrepreneurial growth.”
But participants also warned against complacency. “You often hear of MGAs losing paper,” Adrian Jones, head of underwriting and specialty retail at Acrisure, said. “So an MGA leader needs to be constantly watching claims and capacity.”
The quality of governance today is at a much higher level than ever before, the panel agreed. “Capital is going to be rewarded or eroded based on the amount of governance applied,” said Mike McKenna, head of North America for Axis.
One of the mitigating factors is hybrid fronting. “You’ve got the MGA, the fronting carrier, reinsurance brokers and reinsurers all involved. That’s a lot more eyes on the business, and it helps reduce the risk of adverse outcomes and misaligned incentives,” Allen said.
“The hybrid front model brings alignment,” Jones said. “But not all fronts are created equal. Some take on less leverage than others, some have better underwriting, and some have stronger reserving.”
Discussion also turned to data and information flows. “The data is just incredible now,” Jones said. “It should be real-time. That’s changing everything.”
Unfortunately, a lot of people are operating from information that is still opaque and in arrears, said Federato CEO Will Ross.
“A lot of the market is still trading on the pretty PowerPoint deck, but the most advanced firms are trading on raw access to the data,” Ross said. “There’s a huge amount of value there for everybody, just waiting to be unlocked. I believe we are moving towards a world of more transparency.”
Armijo added: “Even ‘real-time’ data is still lagging – you’re always seeing things after they’re bound. That’s why understanding behavior and trust remains critical.”
“At the end of the day,” Jones said, “this is a business of trust. Trust comes from data transparency. When everyone sees the same data and makes decisions together, that’s a durable business.”
Looking to the capital side, Joe Zuk, operating partner at Altamont Capital – which backed Ascendex – said there’s still abundant capital and liquidity in the system. “But you’re starting to see some irrationality – PE paying very healthy multiples in a softening market. That's going to drive some maybe less-than-savory behaviors in terms of underwriting profitability.”
“The question I think you're raising is for capacity providers; they have to understand who [the capital is] behind these underwriters, and what are they being pushed to do, or not pushed to do,” Zuk said.
He was still optimistic about the market. “Despite more private equity in the space, it remains under-invested and misunderstood by the outside world. That’s our opportunity.”
The trend toward institutional ownership also drew comment. “More than 80% of MGA premium now has some sort of institutional ownership,” Jones said. “Pure independents are the minority that can be very entrepreneurial.”
On organic growth, participants debated whether to incubate new programs or build de novo MGAs. “Finding the right people is the toughest part,” said Ascendex’s Rehnberg. “We look for entrepreneurial underwriters with followings; people who bring both expertise and relationships.”
Others concurred that time and timing are crucial. “A new high-quality MGA takes one to two years to build, and the market can change that fast,” Jones said. “You have to be a bit contrarian to hit the right window.”
Talent shortages were another worry. “We’ve underinvested as an industry in early career training, and automation has changed many entry-level roles. We need to rebuild that pipeline,” Allen said.
Jones added: “Failed InsurTechs have become incredible talent sources; these folks understand both technology and insurance.”
When asked how new MGAs can stand out, Allen put it bluntly: “Value proposition. If you can’t articulate what makes you better, you’re just competing on price, and that’s a recipe for disaster.”
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