Guy Carpenter & Co., LLC, a global risk and reinsurance specialist and member of Marsh & McLennan Cos., has released the findings of its eighth annual Specialty Insurance Program Issuing Carrier Survey. The survey, which analyzes trends and benchmarks movement in the program administrator and managing general agency (PA/MGA) market, reveals that the PA/MGA market continues to thrive and is well-positioned for growth in the year ahead.
Over the last eight years, Guy Carpenter has polled respondents at traditional insurance companies that have specialty program operations as well as true, specialty insurance carriers. Notably, this year saw the highest percentage of traditional carrier respondents (77 percent) since the survey’s inception in 2005. Representatives from 34 different companies were polled.
Participants included agencies, underwriters, reinsurance intermediaries and third party service providers (such as claim administration firms). The published briefing, titled Poised for Growth, provides year-over-year results and analyses of the current program marketplace from the program issuing carriers’ perspective.
Selected key findings from this year’s survey include:
- The majority of carrier respondents (83 percent) are targeting smaller programs with premium volumes between $5 million and $15 million.
- The top challenges facing the PA/MGA market are maintenance of rate level (62 percent) and new business production (44 percent). Other challenges include professional submissions (38 percent) such as updated loss information, premium data and financial information on the PA/MGA market; maintaining volumes (32 percent); systems (29 percent); PA relationships (29 percent); new competitors (15 percent); and commission levels (6 percent).
- Reinsurance continues to play an important role for program issuing carriers. Compared to last year, the use of both direct reinsurers and intermediaries increased (up to 76 percent from 66 percent).
- While the majority of respondents believe that the PA/MGA market is smaller than it has been in past years, 65 percent believe, optimistically, that a shift in the industry will occur and the market will grow (65 percent) in 2013.
- Even though carriers continue to be interested in making acquisitions, respondents indicated less interest in growing through acquisitions compared to last year (44 percent and 56 percent respectively).
Carriers also indicated they would be willing to start up programs (74 percent), while 27 percent said they would consider fronting opportunities. According to the survey, as account premiums and program sizes have shrunk “program carriers realize they need to be more flexible in their approach to generating program related revenues”. The survey says carriers are considering smaller programs, larger territorial scopes, start-up programs and fronting opportunities “in order to grow, or to at least maintain a reasonable market share”.
The economy and elevating loss ratios have kept carriers’ growth expectations in commercial lines relative flat, with exceptions in workers compensation and medical malpractice. Both of these lines showed declines in percentage from respondents saying “currently writing, looking for new growth opportunities” or “preferred line and aggressively seeking growth”.
“The results from this year’s survey indicate the continuation of a thriving PA/MGA market. Based upon the results, we are seeing an emergence of themes on change, flexibility and growth, that reflect a positive outlook for the year ahead,” said Bill Harris, managing director of Specialty Programs at Guy Carpenter.
Guy Carpenter & Co. has over 50 offices worldwide with services including line-of-business expertise in agriculture; aviation; casualty clash; construction and engineering; excess and umbrella; life, accident and health; marine and energy; medical professional liability; political risk and trade credit; professional liability; property; retrocessional reinsurance; surety; terrorism and workers compensation. GC Fac is Guy Carpenter’s global facultative reinsurance unit that provides placement strategies, market access and centralized management of facultative reinsurance solutions.
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