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    Home » MGAs Surge in Insurance Market, Driven by Capacity Needs and Economic Shifts
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    MGAs Surge in Insurance Market, Driven by Capacity Needs and Economic Shifts

    insurancejournalnewsBy insurancejournalnewsMarch 7, 2025No Comments5 Mins Read
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    MGAs: A Growing Force in the Insurance Landscape

    In today’s dynamic insurance market, Managing General Agents (MGAs) are becoming increasingly important, particularly concerning capacity and retention. Research from Conning indicates that the US MGA market surpassed $102 billion in premiums during 2023—a figure that continues to climb.

    $102 billion and climbing: Why MGAs are taking over the insurance game
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    In fact, the MGA market experienced a robust 13% growth rate over a single year, outstripping the 10% growth of property-casualty premiums. Brian Refici, Vice President at MarshBerry, provides context for this expansion.

    “What we’re seeing across the market is two-fold,” Refici says. “The first main dynamic is [carriers] exiting the admitted market space and the expansion in excess and surplus lines, as well as where the wholesalers play. We don’t expect that trend to decrease. In fact, we’re seeing that acceleration throughout. “

    “We’re [also] seeing a lot of consolidation now, with the top 50, and even the top 100, brokers starting excess and surplus lines divisions. Where the surplus market is today is more consolidation and control on the brokerage and distribution side, with a binder that meets all risks in both admitted and non-admitted lines – putting more pressure on the carriers to understand what those dynamics are looking like.”

    Economic Shifts and Their Impact

    Beyond the shifts of carriers and expansions, economic changes significantly influence loss cost trends. Population migration patterns are notably affecting the insurance sector, particularly in commercial property, construction, and workers’ compensation.

    “Not only are the risks actually getting harder to write because of the population shift, but where people are moving further complicates the underwriting guidelines,” Refici added. States such as Florida and Texas are experiencing increased population density, leading to heightened underwriting challenges.

    “Historically, Florida had storms, but there wasn’t the same impact on population. Now, we’re seeing storms impact populations, partly because the density is growing. Regulators are also trying to take more and more of a stance on protecting the end consumer in the admitted markets. That’s part of the cause of why we’re seeing more of these admitted risks move over, in my opinion, into the non-admitted market.”

    Challenges in Workers’ Compensation

    The workers’ compensation market also presents emerging difficulties. A shifting industry and the re-onshoring of manufacturing within the US is expected to negatively impact workers’ comp in the future, as Refici explains.

    “Perhaps – and again, this is more of my opinion than a crystal ball forecast – but I do think those trends in general are going to impact both property and casualty markets going forward.”

    Cyber Risk and Market Evolution

    Cyber risk continues to be an evolving challenge across all sectors, including insurance. Research from Security.org revealed that the global cyber insurance market was valued at $13 billion in 2023, with projections anticipating growth up to $22.5 billion by 2025.

    “How do you price cyber? What is the true risk associated with this?” Refici asks. “Carriers price risk based on a look-back theory, and as cyber was emerging, there wasn’t a lot of actuarial or underwriting data to help price that risk. As we get smarter with that – using cyber here as an example – the change in trends to pricing that risk accurately is going to continue to evolve as that risk develops.”

    Surplus Lines Surge

    At the CIWA event, a key takeaway was the rapid growth of surplus lines. Refici pointed out that by 2026, surplus lines premiums will be at least 25% of total US commercial P&C premiums. This represents a significant jump from just 5% over the last 25 years.

    “The reason risk is leaving the admitted market and going into the non-admitted market is that the non-admitted market is free of rate and form,” Refici stated. “You’re basically bypassing the regulator to some extent, but you’re doing that within the rules they put in place. The dynamic results in harder risks being placed for some of the reasons we’ve already addressed – global economic trends, higher severity and frequency of natural disasters, and billion-dollar storms on the property side.”

    Alternative Risk Placement

    Emerging alternatives to traditional insurance models could further influence the market. Refici noted, “We shouldn’t discount the trend of alternative risk placement services. We’ve talked about parametric insurance, the role of fronting carriers, and insurtech firms developing technology to price risk. Some are forming captives and keeping that risk for themselves because the underwriting models haven’t caught up.”

    Substantial interest in the MGA model is also present among private equity firms, carriers, and other industry players. Kelly Maheu, VP of industry solutions at Vertafore, highlights the appeal: “As carriers continue to move away from underwriting all risks to focusing on specialization, they need to rely on specialized MGAs, which helps drive deal activity in the sector ,” “MGAs have leaner operations and lower overheads, and they tend to see higher margins compared to retail agencies. “Their focus on niche insurance products often means they have more power over premium and policy terms – these are factors that often add up to strong, consistent profits.”

    Refici indicates the market will eventually reach a plateau as risk assessment becomes more complex. “From the conversations that I have daily, the risk is getting more complex, but, at a certain point, it’s got to reach a plateau. With parametrics, AI-driven risk calibrations, and technological advancements, the progression has to slow at some stage,” he said. “Something else could change – like the regulatory environment starting to look at the non-admitted lines. That’s the other shoe that can drop, bringing more of that non-admitted risk back under the regulator’s purview. I’m not forecasting that to occur, but it was definitely a theme at CIWA.”

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