MGA-sourced premiums exceeded $70 billion in 2021 – report

According to a new study by investment management firm Conning, direct premiums sourced by managing general agents (MGAs), including business written for the account of Lloyd’s syndicates and non-US insurance companies, exceeded $70 billion in 2021. Growth in MGA-sourced premiums far exceeded the solid growth already achieved in the P&C market as a whole, of which MGAs constitute a key distribution channel.

According to Conning, growth drivers included the strong rebound in the national economy following pandemic-induced lockdowns, while the consistent, broad-based rise in premium rates was particularly influential for the more challenging lines of business such as cyber typically insured in the excess and surplus lines (E&S) market, where MGAs remained very active.

Fronting insurers have played a growing role in channeling capital to support MGAs, the same report noted. “Fronting companies today play a critical role in securing capacity for MGAs, and we expect this to continue to grow,” said William Pitt, director of insurance research at Conning. “Most of these fronting companies retain a portion of the risks themselves to ensure their interests are aligned with those of their reinsurers. We have also seen a number of the larger MGAs become risk-bearing entities themselves through the establishment of reinsurance captives.”

The Lloyd’s market has historically been the biggest single source of capacity for MGAs in the US, a trend that carried over to 2021.

“The economic rebound that spurred a robust recovery for the economy post COVID-19 boosted the business of MGAs…,” said Lauryn Kothavale, assistant vice president in insurance research. “MGAs were historically looked upon by insurers as means to access additional premium in soft markets. But their risk pricing capabilities have expanded and their role in sourcing attractive niche business for insurers in today’s hard market is every bit as important.”