Two years is a long time in the program market. And this week’s long-anticipated return of the Target Markets Program Administrators Association (TMPAA) Summit brought a record attendance as well over 900 delegates descended on Scottsdale, Arizona thirsty for a return to large-scale face-to-face interaction.

Target Markets

Add the unregistered “lounge lizards” to the total and those numbers likely swelled beyond 1,000 as one senior source heralded a “return to deal-making”.

The record numbers would have been higher still had the Covid-19 travel restrictions been lifted a few weeks earlier to allow the sizeable Lloyd’s and London market contingent to make the trip across the Atlantic.

Despite their absence, there was an almost giddy excitement around the Westin Kierland Resort complex – not just fuelled by reunions (the bars certainly did a good trade), but also by the palpable sense of optimism that surrounds a sector of the market that is generating record growth and a level of interest that has not been seen before.

This publication has reported on many of these dynamics before, but two years since the last TMPAA Summit, there was a sense that there has been a step-change in the pace of development.

The premium volume growth speaks for itself – up 32.8 percent to $53.8bn between 2018 and 2020 (according to the latest TMPAA survey), with significant further expansion expected this year after a pick-up coming out of the pandemic.


Part of the growth story is the hardening rate environment and the increased volume of business coming into the programs sector from other parts of the US insurance market.

But there are also symbiotic structural changes taking place that are fuelling the growth momentum.

People, platforms and paper

There is arguably a record migration of underwriting executives from insurance companies seeking the opportunity to strike out in an entrepreneurial program administrator, MGA or MGU environment.

The success of MGAs and the heightened interest from investors – especially private equity – that has bid up valuations is an alluring option for those underwriters who don’t believe their talents and business building skills are being fully compensated in the traditional carrier structure.

With hard market conditions across many lines, entrepreneurial underwriters feel their currency has never been higher and with the possibility of building equity as part of an MGA that is where they see the potential rewards.

If anything the pandemic has accelerated that migration as some individuals have also sought out a more flexible working environment.

At the same time (and a little chicken and egg), a wave of new MGA platforms has emerged – several of which have set themselves up to attract underwriting teams with the promise of being able to offer the infrastructure and speed to market to allow the underwriters to focus on what they do best.

In addition to stalwarts such as Euclid Insurance Services, there have been several new entrants in recent years, such as Balance Partners, Tango Specialty and Mission Underwriters. There are also those that have emerged alongside carriers, such as Applied Underwriters and Ethos Specialty, as well as other hybrid models such as Accelerant.

With so many iterations of the model, there are now plenty of potential homes to fit underwriters looking to make the move. And the multiples that MGA platforms are currently being bought at (see Align Financial’s sale to Howden’s Dual) demonstrates the potential value that can be built by those behind the ventures.

Those platforms also have a significantly broader array of program carrier options to seek out paper from.

TMPAA program carrier members have now gone beyond 70, and a big driver in the expansion has been the wave of hybrid fronting carriers, including almost 20 in little more than two years to add to the handful of more established players.

With the latest – Concert – completing its capitalisation and securing an A- AM Best rating during the event, sources have said there are still more new entrants looking to launch in the coming months.

The vehicles provide MGAs and program administrators with a greater number of options than ever before to secure capacity and more directly access reinsurance.

Too many mouths to feed? 

Those three elements – people, platforms and paper – are of course all symbiotic. New programs (sometimes created by new underwriters to the sector) need access to capacity; the emergence of more MGA platforms and incubators provides a home for underwriters who might not have the stomach for the red tape and other challenges of building their own program; and hybrid fronting carriers are being fuelled by demand for their paper and services from those new programs and platforms.

At TMPAA, there were plenty of questions about the sustainability of growth and whether the volume of new programs and broader growth in the sector will be enough to feed the legion of new program carriers.

There was certainly some surprise about the potential for more entrants, and suggestions that the current phenomenon could be cyclical, in part driven by the desire of reinsurers to access program business that they can’t get to by reinsuring traditional insurance companies.

But others remain bullish and don’t see any shift in the dynamics that are driving “astronomical” submission flow and the launch of new programs, both in the more tried and tested segments of P&C insurance as well as new demand to cover emerging risks and the ongoing insurtech revolution.

The continued development of data and analytics, technological evolution and more efficient processes mean that the modern-day MGA is seen as a much more sophisticated proposition than a decade or two ago.

More immediate transparency around the performance of portfolios is one of the factors that reinsurers – and fronting carriers – say differentiates the current scenario from the dark days of the late 90s and early 2000s when the program sector suffered significant pain.

There were plenty of other topics for discussion at the TMPAA Summit, of course, and here are just a few…

ILS appetite

Although ILS capacity is not yet a significant feature across the program sector, there is mounting activity with the emergence of a number of different players looking to write quota shares or take programs 100 percent.

This publication recently reported on Ledger Investing, which last month launched its Nanorock Fund to bring multi-year ILS casualty capacity to MGAs as well as program insurance companies looking for an alternative to traditional reinsurance.

Sources said that others such as Stone Ridge’s Long Tail Re and MultiStrat have been active in the space, although deal volume is yet to pick up.

Reinsurance hunger

There is also no shortage of appetite from reinsurers to access US program business, whether by reinsuring a traditional program carrier or participating on a panel behind a hybrid fronting carrier.

The attractiveness of the pricing environment and growth trajectory in the business is an obvious allure – particularly when compared to the more sluggish pricing dynamics currently being seen in the traditional treaty reinsurance sector.

But so is the fact that much of the business that gravitates to the program sector – especially in the SME space – is not typically accessible for reinsurers via a non-program insurance company.

Lower volatility, profitable smaller premium business is typically retained by a regular insurer if it writes it, with reinsurance usually procured for more volatile risks.

By supporting a hybrid fronting carrier, a reinsurer knows that it will have the opportunity to reinsure more of the business.

M&A multiples still sky high

There was plenty of M&A talk at the event – especially in the aftermath of Align’s recent sale to Howden’s underwriting arm Dual.

Although there are a number of MGAs currently out in the market involved in sale processes, there was also talk about the scarcity value, especially for platforms, that is driving up valuations to record levels. Some processes are taking longer than expected, however, impacted by mismatches in pricing expectations.

The imperative of taxation changes appears to have eased a little in the minds of potential sellers, but there was no suggestion that the hot M&A market will go away any time soon.

(Almost) no shrinking carriers

Program administrators canvassed by this publication said that few if any of their carrier partners are shrinking in this environment. And traditional program carriers spoken to during the event verified that claim.

There are a few exceptions, however, with at least two of the recently rebooted specialty carriers undertaking surgery on their programs portfolios over the last few months.

Social inflation is real

Despite the lull in the flow of major verdicts caused by the shutdown of the courts during Covid-19, nobody is under the illusion that social inflation is going away.

There was stark reality in data presented by Advisen on the surge in claims costs associated with single fatalities and the TMPAA’s biennial survey reported that social inflation was a key driver in pricing for many participants.

Program administrators said they are increasingly factoring the potential impact into pricing, and there were also concerns about the growing influence of litigation finance on the sector that could drive up loss costs even further, even on more attritional claims. The environment is being exacerbated by anti-business sentiment among juries.

And so is climate change

As at the Council of Insurance Agents & Brokers event earlier this month, the need to reassess catastrophe risk and address it through pricing and terms was a strongly debated subject among those with property programs.

There has been plenty of pain again this year for MGAs with programs exposed to habitational or other commercial residential business in areas hit by hurricanes and winter storms, while those with exposure to tornado and hail (including dealers’ open lot) are continuing to address the issue of increased frequency of severity.

The program sector is seen as a venue for innovation around these growing risks, however, including in flood, where the continued development of a private flood market as an alternative to the National Flood Insurance Program is seen as a significant opportunity.

Talent shortage

For all the talk of senior underwriting talent flowing in, a look around the venue was pretty revealing of the demographic challenge facing the program sector.

The talent gap is seen as a stark reality that needs confronting, and fast. As a home of innovation, and with its potential to provide more flexible workplace environments (particularly among some of the new tech-enabled entrants), there may be appeal in the program sector for the next generation of talent.

For all the bullishness about near-term prospects, the long-term future of the sector will not be sustainable unless there is a dramatic shift in its demographics, however.