Managing general agents (MGAs) have become vital intermediaries in the insurance industry, offering specialised products that traditional insurers may shy away from due to complexity or niche demand. They bridge the gap between insurers and policyholders, focusing on hard-to-place risks and providing tailored solutions that would otherwise be difficult to obtain. Earnix, a firm which works alongside some of the world’s largest insurers, delves into the growing role of MGAs in the market.
Partnering with MGAs enables insurers to expand their market reach while keeping operational costs in check.
By providing more policies to insurers’ customers at a relatively low cost, MGAs contribute to greater profitability and improved customer retention, making them valuable partners in the insurance ecosystem.
A rapidly expanding market faces new hurdles
The MGA sector has experienced substantial growth in recent years, particularly among those focused on emerging risks, claims management, and superior customer service.
According to MarshBerry research, as of 2024, over 350 MGAs in the UK manage more than 10% of the country’s £47bn general insurance premiums. This surge has been driven by evolving market needs, regulatory changes, and technological advancements.
However, this rapid expansion is now being tested by a hardening insurance market. Inflation, geopolitical instability, and climate-related risks have led insurers to reassess their exposure and reduce the capacity allocated to MGAs.
This “capacity crunch” threatens MGAs’ ability to underwrite new policies, introduce innovative products, and maintain their current offerings.
Key factors driving today’s MGA capacity challenges
A combination of economic, regulatory, and competitive pressures is constraining MGAs’ ability to secure insurer backing. Some of the most significant factors include:
- Geopolitical uncertainty: Market volatility stemming from conflicts, trade restrictions, and economic sanctions disrupts reinsurance availability and insurers’ risk appetite.
- Inflation pressures: Rising claims costs and premium rate increases make insurers more cautious in allocating underwriting capacity.
- Performance scrutiny: Insurers are closely monitoring MGA performance, with poor underwriting results or high loss ratios leading to reduced capacity—or even the termination of partnerships.
- Regulatory complexity: Growing compliance requirements add strain to MGA-insurer relationships, especially when non-compliance poses financial or reputational risks.
- Evolving risk landscapes: Climate change-induced disasters such as floods and wildfires challenge risk models, making capacity allocation for such exposures more difficult.
- Increasing competition: A rising number of MGAs intensifies pricing and underwriting pressures, making differentiation and insurer relationships more critical than ever.
- Data and analytics gaps: Effective capacity management demands robust risk modelling, yet many MGAs lack the necessary technology to assess and price risk with precision.
How MGAs can adapt and secure insurer partnerships
Despite these challenges, MGAs can take strategic steps to maintain strong relationships with insurers and secure much-needed underwriting capacity. Industry experts suggest that while capacity is still available, it is now harder to access—making efficiency and profitability more crucial than ever.
To stand out, MGAs must demonstrate disciplined underwriting practices, maintain low loss ratios, and refine claims management. A focus on risk selection, pricing accuracy, and portfolio performance will be key to proving sustainability and long-term profitability.
Leveraging technology for data-driven decision-making
Technology is becoming an essential tool for MGAs looking to optimise their operations and gain a competitive edge. Insurers favour partners who can provide transparent, high-quality data on underwriting performance and emerging risks.
Investing in advanced analytics, artificial intelligence, and machine learning can help MGAs refine pricing strategies, detect early warning signs of deteriorating performance, and enhance risk prediction models.
By implementing automated underwriting platforms, claims management systems, and real-time data monitoring, MGAs can improve operational efficiency, reduce costs, and deliver better outcomes for both insurers and policyholders.
These solutions enable faster decision-making and allow MGAs to respond to market changes with agility, giving them an advantage over competitors still relying on outdated legacy systems.
The future of MGAs in an evolving market
As the insurance landscape continues to evolve, MGAs that prioritise disciplined underwriting, embrace data-driven insights, and leverage technology will be best positioned to navigate capacity constraints successfully.
By fostering strong insurer relationships and adopting digital tools, MGAs can maintain profitability, unlock new opportunities, and continue thriving despite market headwinds.
Read the full blog from Earnix here.
