Across the Pond: Managing General Agents in the UK

The past two years have seen interesting developments unfold on both sides of the Atlantic with regard to managing general agents and their representation, albeit electing to move in slightly different directions.

In May, the 87-year old American Association of Managing General Agents (AAMGA) ended a two-year process of inward reflection and market demographic examination, by voting to throw open its doors to all wholesale insurance practitioners. According to executive director Bernd Heinze, AAMGA’s transformation into the American Association of Wholesale Insurance Professionals (AAWIP) will create a stronger body that ensures the longevity of the market segment.

Meanwhile, 2011 marked a milestone for the sector in the United Kingdom as it gave birth to its first trade body that gives a distinctive voice for MGAs – the Managing General Agents’ Association (MGAA). Eligibility for full membership is reserved for those whose primary fiduciary duty is to their insurer principals – as opposed to that of the broker being the agent of the insured – and drawing attention to this distinction is what drove the body’s creation.

One of MGAA’s aims from the outset was to set its underwriting agency members apart from those falling under the wider “wholesale intermediary” tag, which the UK regulator ascribes it. The body’s founders felt confusion over the definition of an MGA was holding back the professional development and rigor of the sector in the UK. This had been compounded by the current regulatory framework not acknowledging underwriting agents as a class of intermediary unto themselves.

So, while one octogenarian body prepares to widen its net, its infant counterpart in the UK remains focused on achieving its clear and unwavering goal of first defining what “good” looks like in a well-run MGA. This was a big part of the motivation for the MGAA’s creation – its founders felt it vital the Financial Conduct Authority (FCA) understands the distinctive nature of MGAs if it is to regulate them effectively.

Greater understanding should also reduce the duplication of activities between MGAs and insurers that produces cost and bureaucracy in an already expensive and inefficient industry. It will help breed greater trust and unmask any conflicts of interest or bad practices.

To ensure governance is appropriate and proportionate, MGAA’s structure comprises a 10-member board of directors supplemented by five committees. Its chief purposes are to put forward members’ views and negotiate on their behalf with government agencies and departments, including the new FCA regulator, both in the UK and Europe, to establish best practices, including a code of ethics, while working to promote the competitiveness and professionalism of MGAs.

Progress & Success

This mission has been a success. When MGAA launched in 2011 it counted 40 full members underwriting approximately £1.25bn ($1.9 billion). In the less than two years that premium figure has doubled to more than £2.75bn ($4.3 billion), while membership statistics stand at 67 full, 29 market participant and 24 supplier. There are thought to be more than 250 MGAs now operating in the UK, underwriting around 11 percent of its £47bn ($61.7 billion) general insurance [non-life] premium income. And while they are by no means a new phenomenon in the UK, their recent resurgence made the need for independent representation more important.

AAMGA and MGAA are at different points in their lifecycle but both are undoubtedly driven by the desire to create the most relevant, influential and representative body possible for their members operating in specific geographic markets.

Topics Agencies Talent Insurance Wholesale