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MGAs to grow in strength, law firm says  

Managing general agencies (MGAs), or underwriting agencies as they are referred to in Australia, will continue to thrive as insurers see them as key partners in the current hard market conditions, law firm Clyde & Co says in a new report. 

About 45% of carriers surveyed say they expect their MGA partnerships to increase this year and the majority of survey respondents say the economic climate has not had a material impact on capacity allocations. 

MGAs broadly reported that capacity allocation for carriers would not change dramatically this year, with 44% saying there was no change in capacity allocation from carriers while 28% said it would increase by 10% or more. 

About 40% of carriers report a neutral change in capacity allocation with 25% saying capacity allocation would increase by 10% or more. 

“This may reflect confidence that MGAs are well suited to write lines of business that will remain both disciplined and profitable in the coming months,” the report says. 

“The economic backdrop, however, means there will likely be a greater focus on wordings and rate adequacy and a reluctance on the part of carriers to supply capacity for certain lines.” 

The MGA model is particularly attractive in Australia, the report says. 

“There are lots of new players entering or seeking to enter the Australian market,” Sydney-based Partner John Moran said. 

“The MGA route is a good way for London-based capacity to gain access to this market, particularly to write SME business. There’s a lot of interest in lines like cyber, for example.” 

The report says carriers clearly signalled that expertise, data and technical expertise were key factors they looked for in MGA partners. 

“They strongly underlined MGAs’ ability to use data and tech to empower good risk selection as a top priority,” the report says. 

“MGAs have invested in data and tech, the survey showed, and this investment is likely to be bearing fruit as their models evolve.” 

More MGAs than carriers have invested in tech or insurtech in the past year, with 80% of MGAs having made such an investment compared with 55% of carriers, according to the report. 

Click here for the report.