In the latest in The Insurer’s video interview series, Jameson told this publication that MGAs continue to be seen as a highly efficient route for capital to access underwriting risk.

“They can enter and exit markets much more quickly than a balance sheet insurance company and that speed to market is really important for the distribution and insurance carriers alike,” he said.

Jameson index

He added that MGAs and program administrators are also typically at the forefront of product innovation in areas such as flood, cyber and insurtech, helping create growth opportunities for the sector.

The executive also highlighted the influx of hybrid program carriers which provide their paper to MGAs but also take a retention, adding to the established dedicated program units of regular insurance companies.

That means there is a growing pool of capacity to support programs within the primary insurance market, as well as through reinsurers that are willing to support the business.

“Reinsurers are looking for efficient ways to access distribution and an MGA plus a program carrier provides that access to a reinsurance company,” said Jameson.

Another driver in the growth of the program sector has been the trend for large wholesale brokers to form and build out their own MGA and MGU platforms where they own the distribution.

And all of those factors are combining with the broader hard market, with rates – especially in the specialty lines and E&S market where a lot of MGAs operate – currently seeing hardening.

“Combine all of those things together and you have a very robust, strong and growing MGA and programs market,” said Jameson.

Programs churn

One big feature of the US programs space over the last couple of years has been the churn of capacity on programs.

In part that has been driven by retrenchment at Lloyd’s on the delegated authority side, which has been offset by a number of the new program carriers entering the US domestic market, the executive observed.

He highlighted the challenges some MGAs had been faced in their hunt for new capacity during the Covid-19 restrictions, as well as the impact of a hardening reinsurance market.

“This is a people industry and people like to be face-to-face, so onboarding new programs did become difficult for a while. But MGAs also did take this time to look and see if there was a more efficient… or better deal out there.

“So there’s been a lot of activity, a lot of shopping and a lot of churn. We think that’s just been MGAs trying to find more efficiency and more efficient capital to operate on,” said Jameson.

As previously reported, GC Access is the newly launched dedicated MGA/programs unit of Guy Carpenter.

Jameson explained that it was established in response to client demands for a specialist that truly understands the transaction in the MGA and program space.

“We’re trying to help our MGA clients navigate what is essentially a difficult time in terms of a hardening market and reinsurance market with some churn in terms of capacity – trying to bring our expertise and knowledge to bear to help manage these transactions,” he said.

“Creating a boutique reinsurance and insurance broker inside a large organisation in Guy Carpenter brings specialist knowledge of the MGA transaction at GC Access combined with the analytic firepower of Guy Carpenter,” the executive continued.

He also noted that GC Access will work closely with Guy Carpenter’s GC Genesis unit to identify further insurtech opportunities that can be brought into the program space and to educate clients on what technology can be useful to both program insurers and MGAs.

More hybrid program carriers?

A strong theme emerging in the program segment over the last few years has been the procession of hybrid program carriers entering the market as conduits to allow reinsurers to access the business, while also typically retaining a portion of risk, in contrast to the traditional pure fronting model.

And Jameson said he believes the drivers behind those entrants remain and are likely to fuel further start-ups.

He pointed to the acquisition of State National by Markel as a signal to other potential participants that attractive multiples can be achieved by program carriers, at the same time that the growth of the MGA segment has created demand for additional capacity.

“The next evolution was alignment of interest, with the emergence of the hybrid carrier and their ability to take risk as opposed to being a straight pass through to the reinsurance market,” the executive observed.

He noted that reinsurers were demanding more alignment of interest, either from an MGA captive or program carrier that could take risk.

In a hardening reinsurance market, reinsurers have been able to dictate terms more than previously, putting pressure on program carriers to retain risk.

“That capital has come into the space and there are ample opportunities to find good MGAs with the growth in sheer number of MGAs, new products, new offerings and rate increases.

“So we believe we’ll continue to see new entrants in to the market. We’ll see underleveraged carriers looking to service their capital and open up a programs unit and diversify products as well,” Jameson concluded.