Regulators are forcing insurers to make more efficient use of their balance sheets and allocate capital where it can deliver the most effective returns, this allows smaller players in the market the opportunity to fashion insurance packages for special interest groups according to Karen Beales CEO of UK General.

  • 14 Aug 2017 – 01:14 PM
  • News

At the Managing General Agents’ Association’s July Conference, delegates may have been left with the impression that MGAs have become supermodels - the Cara Delevingnes, Kendall Jenners, or the Gigi and Bella Hadids of the insurance world.

Olly Laughton-Scott, boss of the insurance mergers and acqisitions boutique Imas and our industry’s very own fasion designer Karl Lagerfeld, made it clear in his conference presentation that MGAs are, in the language of fashionistas, ‘the new black’.

According to Imas, while the number of brokers has fallen from 7200 in 2005 to 3200 today, MGAs are on the up, from 110 in 2005 to 190 this year. its clear MGAs have become an integral part of the insurance industry.

MGAs are doing well because, in short, they add value. Why is this so? In part, it is because insurers are ever larger and more complex. Aviva’s 2016 Annual report was 362 pages  (228 in 2005, 112 in 2000). Regulators are forcing insurers to make more efficient use of their balance sheets and allocate capital where it can deliver the most effective returns.

Balance sheet management is now a key task for insurer management teams, so they don’t have the time, resource or knowledge to focus directly on the niche and specialist market, which, thanks to the online revolution, has grown exponentially.

Big insurers write big, vanilla books of business, leaving white space for nimble MGAs in niche and specialist. The mass market is not for us. Instead, we fashion insurance packages for special interest groups that are not served by big players and can cover anything from weddings, to bicycles to mobile phones. 

MGAs tailor products to consumer needs, as opposed to large composites providing products they believe customers want.  The whole structure of insurance is changing as a result.

Although UK General was recently acquired by J C Flowers, M&A among MGAs is broadly flat, unlike broking, mainly because MGAs are growing and owners don’t want to sell. 

To be sure, fashion is ephemeral, but right now, the cameras are on us. Smile please and give me happy.

Orignially published by Insurance Post on 14th August. Click here to view the full article.