Why growth is the name of the game for Canadian MGAs

Canada’s property and casualty MGA sector will likely double in the next five years when it comes to commercial insurance market share, an industry executive told Canadian Underwriter in an interview.

Currently, about 20% of commercial business is placed with an MGA, said Steve Masnyk, executive director of the Canadian Association of Managing General Agents (CAMGA). But the MGA channel in Canada is following the trajectory of the delegated underwriting authority enterprise (DUAE) space in the U.K. and U.S., where it represents close to 50% of commercial business.

DUAE is a blanket term for MGAs, managing general underwriters, coverholders and program administrators, among other companies.

“I’m hearing from commercial brokers that one out of two policies they’re placing with an MGA these days is in commercial,” Masnyk told CU. “If we continue down the same path as the U.S. and the U.K., you could see a doubling in market share of the commercial space with MGAs.”

Greg Williams, a senior director at ratings agency AM Best, said during an industry event last October that he believes the Canadian MGA market is “moving in the same direction as the U.S.” The reputation of MGAs globally, but also in Canada and the U.S., has been enhanced over the past five to 10 years; a trend Williams sees continuing.

Masnyk discussed his 2024 outlook for the Canadian P&C MGA sector. From a carrier perspective, he summed up what he sees for at least the next 12 months in one word: growth.

He said CAMGA members, which total 70 companies and represent about 90% of the Canadian market, have seen new business growth between 20% and 120% a year over the last two or three years.

“More and more carriers and capacity providers are seeing the profitable value of delegating that underwriting to an MGA,” Masnyk said. “A few years ago, there was only a handful of carriers delegating underwriting to an MGA. Now in Canada, there at least 50 carriers who are doing it.”

Masnyk estimates there are another 10 to 15 mostly carriers that are not currently doing business with MGAs that are looking at transferring their commercial underwriting authority to MGAs versus keeping it in-house. Certain classes are ‘super keen’: small commercial, mid-sized commercial, hospitality, healthcare, environmental, cyber, and E&O and D&O liability.

“Carriers who have outsourced E&O, D&O financial lines professional responsibility are seeing that MGAs do it better than they used to,” Masnyk said.

But will the shift from a hard market into a soft market bring those classes back into the fold of carriers? “I suspect that’s not going to happen simply because carriers are a lot more comfortable,” he said. “And they see that value of keeping it outsourced versus having it in-house.”

One challenge remains, however, in getting brokers to know the 70 markets MGAs write. To bridge the gap, CAMGA is inviting brokers to Meet the MGA Market at a tradeshow on Apr. 12.

Feature image by iStock.com/oatawa