David HughesThe MGA Executive Role: Lifecycle
This is the fifth in a series of blogs containing excerpts from my forthcoming publication, 'The MGA Book'.
The Executive Role: The MGA Lifecycle
1. Idea: You have a plan (0–20+ years)
You have an idea and incentive to create an MGA:
To get paid more for doing what you already do
To take control of your future
To create a better work life balance
To build a solution to meet your insureds needs
You’ve identified a customer need and want to fulfil it
You’ve created a great bit of technology and want to use insurance to deploy it/commercialise it
You’ve seen other people become wealthy from creating an MGA
Because you were made redundant and need income
2. Start up: The journey begins (3 years)
Seed investment to get going, often regulated under an umbrella arrangement from a regulated entity (broker, underwriter or MGA). The focus is on getting the following set up:
Business plan
Capacity
Systems
Underwriters
Distribution
Claims handling
Cash
Target Annual GWP: £5m
3. Creating lifestyle (3 – 7 years)
Your business is running well, and now you can grow your income with a view to reaching a healthy amount to give you a good income by:
Securing more than one capacity provider
Leveraging your data
Increasing distribution
Developing a brand
Developing claims expertise in house
Refining underwriting and pricing to improve loss ratios
Target Annual GWP: £10-£25m
4. Building an empire (5-10 years)
You’ve been enjoying the lifestyle business. And many MGA owners stop there. But some want to drive forward. Building a bigger operation by adding new classes, some complementary to current product lines, others opportunistic. Activities include:
Adding new product lines
Expanding distribution to other channels
Small scale acquisition
Developing actuarial and analytical capabilities in house
Target Annual GWP: £50m-£100m
5. Global domination (10 years+)
Looking to take your business international, you make the leap few other MGAs do. Either with the help of investors, a partnership or from retained earnings:
Expansion into international territories.
Acquisition of MGAs.
Investors or partnerships often providing growth funds.
Aggressive GWP growth.
Multiple capacity providers with complex reporting needs.
Significant back office functions such as finance, reporting, systems etc.
Professional CEO recruited to take lead on expansion, with you becoming chairman or non–exec.
Target Annual GWP: £100m - £750m
MGA Magic: The MGA Lifecycle
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The author, David Hughes, is founder and CEO of the Insurance Data & Analytics consulting business mulberryrisk.com