mgas and their place in the uk insurance market ......•shaping the future of delegated...

•SHAPING THE FUTURE OF DELEGATED UNDERWRITING

MGAs and their place in the UK insurance

Market – Manchester

• Peter J Staddon ACII ACMI

• 20th March, 2019

1

AGENDA LEARNING OBJECTIVES


• What is a MGA – their unique benefits

• What MGAs bring to the market

• Where they fit in UK Insurance Market

• What is their fiduciary duty

• How does FCA view MGAs

• Why MGAA formed

2

3

We all need to recognise thatchange Is coming!

•HISTORY OF

UNDERWRITING

AGENCIES & MANAGING

GENERAL AGENTS

•SHAPING THE FUTURE OF DELEGATED UNDERWRITING4


Broker InsurerMGA

6

Distribution Model

All MGAs are coverholders but not all coverholders are MGAs!

•Where does their authority

come from

•Binders

•Delegated Authority

•Permissions


➢Performs many of the functions normally undertaken by Insurers, acting as

their agent under a contractual “delegation of authority”

➢Combined Operating Ratios

➢Generally acts as an intermediary between the Insurer and the retail

broker, who are agents of the insured

➢Rare for MGAs to take a share of individual insurance risks. Risk-bearing

stays with the Insurer

The Role of an MGA


“an agency whose primary function and

focus is the provision of underwriting

services and whose primary fiduciary duty is

to its Insurer principal

The MGAA has defined an MGA as:

FIDUCIARY DUTY


• “Brokers interested in alternative distribution opportunities may look to acquire

digital MGAs in 2018-2019. MGAs are authorised to perform certain

functions ordinarily handled only by Insurers - binding coverage,

underwriting and pricing, appointing retail agents within a particular area and

settling claims – which are attractive to small-to-medium businesses that

don’t want to buy insurance through traditional brick-and-mortar

brokers. Acquiring an MGA can be less expensive for a broker to offer these

services than develop them in-house”

• Deloitte Insurance Outlook 2018

What is driving the emergence

of MGAs?

10

• But only if MGA maintains balance between underwriting profit and

their own financial return

Why an MGA?


FINANCIAL

RETURN

UNDERWRITING

PROFIT

11

• Living in a Regulated environment

➢ Insurers, Brokers and MGAs all now regulated by FCA

➢ Insurers subject to Solvency 11 from the EU

➢ Lloyd’s put in place strict rules for delegated authorities

➢New Senior Manager Regime phasing in over next 2 years

• FCA-Financial Conduct Authority key objectives:

➢Secure an appropriate degree of protection for consumers

➢Protect and enhance the integrity of the UK financial system

➢Promote effective competition in interests of consumers

• “

Regulation and Governance of MGAs


• FCA- “Culture of good conduct” more than good governance and

compliance

• MGAs need to believe in and demonstrate:

➢An ethical culture which fits the organisation

➢Driven by visible commitment from/at the top

➢Well communicated internally and externally

➢Supported by compulsory and continuing education

➢Subject to strong monitoring

➢Supported by- not subverted by- recognition and reward

• The Values + Ethics + Conduct = Culture continuum

Regulation and Governance of MGAs


14

http://startupquote.com/post/1017161697

• Most MGAs don’t go direct to

Policyholders

• MGAs access most of their

business from Retail Brokers

• Most MGAs underwrite specialty

commercial business for SME

Policyholders

➢ Liability, commercial combined,

commercial motor, financial lines,

marine

• And non-standard and high-hazard

personal lines

MGAs in the Market


Insurer

Policy Holder

Retail Broker

Policy Holder

Wholesale Broker

Retail Broker

Policy Holder

MGA

Policy Holder

Retail Broker

Policy Holder

Wholesale Broker

Retail Broker

Policy Holder

15

➢ Since the industry

became regulated

in 2005, the

number of FCA

authorised entities

has almost halved

➢ In the same period,

MGAs have

increased by over

50%

➢ Wholesale broker

numbers have

remained static

0

20

40

60

80

100

120

140

160

180

200

0

1000

2000

3000

4000

5000

6000

7000

8000

JAN

05

JUN

05

NO

V0

5

AP

R0

6

SEP

06

FEB

07

JUL0

7

DEC

07

MA

Y08

OC

T08

MA

R0

9

AU

G0

9

JAN

10

JUN

10

NO

V1

0

AP

R1

1

SEP

11

FEB

12

JUL1

2

DEC

12

MA

Y13

OC

T13

MA

R1

4

AU

G1

4

JAN

15

JUN

15

NO

V1

5

AP

R1

6

SEP

16

FEB

17

MG

A/W

ho

lesa

le

All

Bro

kers

MGA and Wholesale brokers vs Total Broker Market

MGAs Wholesale All brokers

Development of the MGA MarketMGAs as % of market have dramatically increased (factor of 3)

16•SHAPING THE FUTURE OF DELEGATED UNDERWRITING

With kind permission of IMAS

➢ Broker M&A

activity has

significantly

increased, whilst

targets have

decreased

➢ MGA negligible

increase in M&A

activity, whilst

numbers

increasing

➢ MGA numbers

continue to

increase?0

5

10

15

20

25

30

35

2011 2012 2013 2014 2015 2016

Nu

mb

er o

f D

eals

M&A Deals 2011 to 2016

All Brokers MGAs

Linear (All Brokers) Linear (MGAs)

M&A ACTIVITYMGA M&A activity has been increasing, but not as fast

as for brokers generally.

17•SHAPING THE FUTURE OF DELEGATED UNDERWRITING

With kind permission of IMAS

Membership of the MGAA

19

• Convey the views of its members to UK and European parliaments, government

departments, regulators and other relevant insurance organisations

• Represent members' interests in negotiations with bodies whose rulings,

regulations or controls may impact members

• Set best practice guidelines to assist members in ensuring the stability, security

and reputation of their MGAs

• Assist insurance carriers that support MGAs to maintain the stability, security

and reputation of their binding authority arrangements

• Work proactively to improve the MGA sector's professionalism, stability and

competitiveness

• Create a technical centre providing commentary, information and guidance on

relevant regulatory developments

• Seek opportunities to promote training, education and high standards of products

and services

The Role of the MGAA and it’s

Objectives



•Q&A

• www.mgaa.co.uk

21

Peter J StaddonChartered Insurance [email protected] 7617 4442

http://www.mgaa.co.uk/

mailto:[email protected]

mgas and their place in the uk insurance market ......•shaping the future of delegated...

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