There has never been a more worrying time to keeping your capacity.
MGAs offer insurers routes to niche markets whilst retaining a level of capital fungibility. But the state of the London Market has sent shock-waves across global MGA capacity markets.
Acapella, Pioneer and Vibe all going into runoff. The change, to force syndicates to improve results, kicked off in 2018 with the Lloyd’s decile10 project.
Further pressures on business plans have seen Syndicates withdrawing from classes with the impact of experienced teams of underwriters facing redundancy. And the Lloyd’s restrictions have had further knock on impacts to the wider company market.
These changes are having a three fold impact on the market for MGA capacity:
1. MGAs need to show profitability and meet minimum standards. 2. New MGAs are starting up from many of the ‘let go’ underwriting talent. 3. Getting new capacity is proving hard, with the need to demonstrate adherence to strict underwriting and financial performance.
We are seeing a market where more MGAs are competing for less available capacity.
What can you do to stand out from the crowd?
There are many challenges you face as an MGA owner.
But at this moment in time, protecting your capacity should be your priority. I advise a three step process:
1. Own your Numbers:
Ensure data quality of highest standards.
Review loss ratios, premiums and rate adequacy each month.
Forecast ultimate loss ratios.
2. Communicate effectively and regularly:
Set up minimum quarterly underwriting meetings with capacity.
Prepare a capacity report for meetings.
Be open and develop a strong partnership.
3. Embrace Lloyd’s minimum underwriting standards:
Aim to take the best parts of LMUS.
Ensure rate change tracking and technical loss ratios are included in data collation.
Document underwriting rationale.
Running a business is incredibly difficult. Running an MGA adds a level of technical difficulty on top of that which makes it an extremely challenging endeavour.
The author, David Hughes, is the founder and CEO of the Insurance Data & Analytics consulting business www.mulberryrisk.com