Welcome to the first issue of Program Manager, the new monthly ezine brought to you by the publishers of The Insurer.

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Even before Covid-19 and the dramatic shift now taking place in the broader non-life insurance industry, interest in the program sector had arguably never been higher.

The MGA and program administrator segment had been subject to record attention from PE investors looking for the attractive cash generating business that the model provides.

At the same time, MGAs and program administrators are looking to broaden and deepen their capabilities (including through M&A) to be able to demonstrate to potential buyers that they have the kind of integrated platforms that can attract premium valuations with the highest Ebitda multiples.

And then there is the wave of program fronting start-ups that have entered the scene.

Following the success of State National – the fronting carrier that dominated the space and was sold to Markel at a high multiple – a line of similar vehicles have been rolling off the production line vying for their share of a growing market for licensed insurance paper.

More traditional program carriers have also been looking to expand their fronting capabilities. That demand for fronting capacity is being driven by several factors.

Capacity issues

Program administrator and MGA relationships that have been over concentrated with a small number of insurers have been tested by retrenchment and changing appetites, leading to instability as a result of program and capacity churn.

That has been demonstrated by the many MGAs that have struggled to replenish lost capacity over the last 18 months as a result of a pullback from carriers, both domestically and at Lloyd’s.

At the same time traditional reinsurers – and at times alternative capital providers – have been ever more interested in accessing program business.

To do so they have typically had to work with either pure fronts or hybrid vehicles that assume a portion of the risk.

The emergence of insurtech players seeking to evolve into MGAs has also driven demand for reinsurance capacity and access to fronting carriers to facilitate it.

Retail aggregators

And the appetite of retail agent aggregators to work with MGAs and fronting carriers to develop programs that pool risk in areas like the SME segment to be taken straight to reinsurers also has the potential to transform the space.

All of this activity comes at a time when the “traditional” US program insurance market has been seeing solid top line growth.

According to the most recent data from trade body Target Markets, program business revenues jumped 12 percent to $40.5bn between 2016 and 2018. Since 2011 the size of the market has more than doubled from $17.5bn.

We believe that the events of the past few months only serve to heighten interest in the program space.

And our debut issue is a microcosm of some of the dynamics currently being seen. We bring you an exclusive look at Munich Re Specialty Insurance’s appetite to grow its book of program business as it sees opportunities in the changing marketplace.

There are multiple M&A stories involving fronting carriers and MGAs, new program launches and product innovation.

And we report on strong growth at R&Q’s established Accredited business, while new kid on the block Obsidian sets out with a dual strategy that includes working with retail aggregators to bring new pools of risk to reinsurers.

Program Manager brings you select highlights from our flagship title The Insurer, which we wholeheartedly recommend you read too for our core daily coverage of the global specialty (re)insurance sector.

We also value your engagement and insights, so please feel free to contact me with your feedback.

In the meantime, we hope you enjoy the read…

David Bull, North American Editor