The shortage of quality capacity and the regulatory environment have emerged as two of the biggest issues surrounding the European program management sector.


Speaking on a virtual panel debate hosted by Program Manager, Accredited Europe’s head of underwriting, European program management Nick Evers outlined some of the factors that have led to a reduction in capacity for MGAs.

Evers said the capacity squeeze had in part been driven by the remediation work undertaken at Lloyd’s, which led some carriers to scale back their support for MGAs. He added that the Covid-19 pandemic had exacerbated the situation, which against a backdrop of a hardening market had led to a “severe” reduction of capacity.

“I think the danger of this and the concern for the overall MGA market is that a lot of the MGAs which are struggling to find capacity might start running into the arms of capacity providers without rating,” Evers said.

Nick Evers, Head of Underwriting, European Program Management, Accredited Insurance (Europe) Limited

“This could affect the quality of MGAs and we could potentially see adverse effects,” he added.

Mark Bacon, chief product officer at Kingfisher Holdings, stressed the importance of quality capacity to MGA businesses:

“Capacity is absolutely king as an MGA; it’s the life blood of our business,” Bacon said. 

“We know that without capacity, we have nothing,” he added.

Mark Bacon, Chief Product Officer, Kingfisher Holdings Limited

Bacon – who recently moved into his group-level role at Kingfisher from subsidiary First Underwriting, where he was managing director – said that MGAs are entirely reliant on high quality, sustainable and value capacity.  

He said new MGAs are particularly challenged when it comes to sourcing cost-effective quality capacity due to start-up loading in capacity pricing.  

Issues surrounding capacity were also highlighted by MS Amlin AG’s EMEA market unit head Konrad Babl as a potential challenge on the horizon for the sector.

“From our perspective as a risk carrier, I would say that the biggest issues going forward are the reduced number of paper providers.

Babl said the European market had seen a number of cases where licences had been withdrawn from risk carriers, which he said went hand in hand with challenges posed by the current regulatory environment.  

“I believe this will also be a great challenge going forward for regulatory environments which are used to small local markets as this shifts to business which is transacted across borders and even worldwide.”

Accredited Europe’s CEO Colin Johnson also singled out the regulatory environment as his biggest concern for the sector.

“That comes from the fact that over the last four or five years, the MGA space in Europe has not performed very well from the regulatory and profit prospective,” he said. 

Colin Johnson

Johnson said that despite efforts from operators across the European MGA and program management sector to rectify this, the industry still had some way to go in terms of changing that outlook and the way that regulators view the space. 

“I think there is a belief from some of the regulators particularly that the MGA space is poorly managed and a non-profit-making sector when in fact at this stage, it’s a very exciting place to be.

“So I think it’s all about trying to get that message across to regulators and insurers in the market in general,” he added.

Echoing Johnson, Mike Palmer, CEO of consultancy firm Palm Re, outlined that the collapse of firms including CBL, Gable, Elite and Alpha in recent years had highlighted the “chronic shortage of decent rated insurers and fronting companies of the quality of Accredited” in the market. 

Mike Palmer, CEO, Palm Re

This panel debate is brought to you by Program Manager – the free-to-read monthly ezine from The Insurer. Each month we deliver in-depth coverage of the sector from our team of experienced journalists on the ground in North America and Europe.

This virtual debate – focused on the European MGA and program management sector – follows our recent US panel, where panelists discussed the US program market and drivers of growth, the E&S effect and impact of Covid-19, hybrid program fronting carriers and new tech opportunities. 

Click the link below to watch the debate in full…

What do capacity providers and reinsurers want?

Also participating in the virtual debate, Richard Clapham, group CEO of the industry’s largest international MGA operator Dual, highlighted some of the characteristics that he believes capacity providers are looking for in an MGA, singling out distribution as the main attraction.

“The real key is understanding the value that MGAs are providing and clearly it’s around distribution and access to markets, which I think, if I look at a lot of capacity providers, they’re looking to access that distribution.  

Clapham added that talent also plays a “key part” for an MGA in attracting capacity providers, as it is fundamentally the underwriting talent that leads to MGAs making an underwriting profit.

Palmer said that from a reinsurer perspective, “stability and longevity” were important factors when choosing partners.  

“We don’t just want year-long contracts, we want to try and find partners and contracts that are going to survive the test of time,” Palmer added.

Martyn Glover, partner at Gallagher Re said that for reinsurers, the value of supporting an MGA  or an MGA program provider is not only the additional premium they offer but the opportunity to access “new and innovative products or disrupters”.

Martyn Glover, Partner, Gallagher Re

“MGAs do bring a lot of variants to a portfolio. And as long as we’ve got that underwriting behind it, reinsurers will back the carrier on a long-term basis,” Glover said.  

“That’s what ultimately people want, they want the sustainability of long-term capacity to invest in their business.  If they can do that, that’s how you get the success,” he concluded.

Opportunities in the European MGA market

Despite the challenges the market faces outlined above, Europe remains a fertile ground for MGAs to grow and develop business.

A recent survey by Clyde and Co highlighted that in 2019, London was the preferred market for growing and developing MGA businesses, followed by Lloyd’s. But in 2020, while the London company market continued to dominate, fewer carriers and to a lesser extent MGAs identified Lloyd’s as the preferred route for growth.

Conversely, Europe as a market for MGA business increased in popularity – from the perspective of both carriers and MGAs (see chart).

Which environment will provide the best opportunity to grow and develop MGA business in 2020?

In 2019, no MGAs participating in the study identified Europe as a market where they would chose to base and develop a business. A year on and 11 percent of participants said it would be their preferred location.

The picture was similar amongst carriers surveyed by Clyde and Co, with the European market jumping from 0 percent to 6 percent in popularity year on year.

The MGA market in 2020