Market forces of consolidation, competition, capital and technology are leading "increasingly to change" in the insurance sector, according to TMPAA president Tony Campisi, forcing insurance companies to find new ways to help customers manage their risks. The market for program management, a delegated authority through MGA & # 39; s, is uniquely placed to meet the demands of a changing insurance landscape.
"It is the golden age of MGA & # 39; s" said Glenn Skrynecki, head of real estate programs at QBE North America. "The market for program management is in a growth trajectory that exceeds the growth in the broader real estate and accident markets (P & C) .It also has average loss ratio on a 10-year basis between five and eight points better than the P & C markets, and from that perspective it is a hot market. "
In the natural system of things pull & # 39; hot markets & # 39; investors. As program managers and MGAs grow, the amount of consolidation activity (in the form of mergers and acquisitions – M & A) also increases.
"Program administrators and MGAs bring highly disciplined and niche acceptance capabilities that not all providers have.If you add that to the relatively rapid growth, scale and premium they can offer, MGA's highly attractive prospects the market for mergers and acquisitions of insurances, "noted Skrynecki. "We see an extreme interest in private equity looking for MGA & # 39; s and there is also a lot of interest from national and international brokers in buying or starting programs & # 39; s and MGA & # 39; s."
Good, established programs are what searchers really seek, according to Erin Fry, head specialty and victim programs at QBE North America. Acquirers want scale, profitability, reliability and historical data. As more and more new entrants enter the market, Fry predicts that the competition will warm up for the best programs. However, it is not easy for acquirers because good programs often do not move. They remain on their market for courier services for years and will often only switch if there is a form of market disruption or an activating event.
In addition to increased interest in consolidation, Fry and Skrynecki have also seen more companies (carriers, brokers and startups of insurers) to set up insurance programs to help tap this fairly lucrative market. But setting up a successful program is easier said than done.
Skrynecki explained: "A national broker may analyze its portfolio and realize that it has 10,000 hardware stores that could bundle it together in a program, which is often how discussions about programs start. becomes – what type of data do you have and can you understand how that data performs? That is usually missing.
"At QBE North America, we want our programs to contain very precise data, and you can use historical data to understand loss-of-life and profitability for programs with proprietary rights, but if you create a new program and you only examples of the loss runs, this is not the level of detail that a courier normally wants, the other part is that a broker can not get up in the morning and says he wants to be an MGA.There is a discipline of acceptance linked to that which is very different from being a broker. "
When it comes to starting an MGA & # 39 ;, Fry said that it is also important to understand the context. Starting an MGA from scratch is very different from a scenario in which a large listed company with $ 10 million in premium or wholesale activities says that they want to merge these activities into a program administration.
"If you are a complete start-up, you do not always know what carrier partners expect, while a long-standing partner who wants to merge a homogenous company already has the necessary systems, partnerships and relationships," she commented.
There has been a lot of interest in the market for program management by insurtech start-ups. As Skrynecki pointed out: "Every techie with an insurance-oriented product wants to become an MGA and start a program, they need to understand that to run a program distribution and a market for courier services are needed.Although their technology is brilliant, their vision on the insurance market, which sometimes means that the risk and the reward are too far apart for the carriers. "