mgas and their place in the uk insurance market ......•shaping the future of delegated...
TRANSCRIPT
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
MGAs and their place in the UK insurance
Market – Manchester
• Peter J Staddon ACII ACMI
• 20th March, 2019
1
AGENDA LEARNING OBJECTIVES
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
• What is a MGA – their unique benefits
• What MGAs bring to the market
• Where they fit in UK Insurance Market
• What is their fiduciary duty
• How does FCA view MGAs
• Why MGAA formed
2
3
We all need to recognise thatchange Is coming!
•HISTORY OF
UNDERWRITING
AGENCIES & MANAGING
GENERAL AGENTS
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING4
5
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
Broker InsurerMGA
6
Distribution Model
All MGAs are coverholders but not all coverholders are MGAs!
•Where does their authority
come from
•Binders
•Delegated Authority
•Permissions
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING7
➢Performs many of the functions normally undertaken by Insurers, acting as
their agent under a contractual “delegation of authority”
➢Combined Operating Ratios
➢Generally acts as an intermediary between the Insurer and the retail
broker, who are agents of the insured
➢Rare for MGAs to take a share of individual insurance risks. Risk-bearing
stays with the Insurer
The Role of an MGA
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING8
“an agency whose primary function and
focus is the provision of underwriting
services and whose primary fiduciary duty is
to its Insurer principal
The MGAA has defined an MGA as:
FIDUCIARY DUTY
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING9
• “Brokers interested in alternative distribution opportunities may look to acquire
digital MGAs in 2018-2019. MGAs are authorised to perform certain
functions ordinarily handled only by Insurers - binding coverage,
underwriting and pricing, appointing retail agents within a particular area and
settling claims – which are attractive to small-to-medium businesses that
don’t want to buy insurance through traditional brick-and-mortar
brokers. Acquiring an MGA can be less expensive for a broker to offer these
services than develop them in-house”
• Deloitte Insurance Outlook 2018
What is driving the emergence
of MGAs?
10
• But only if MGA maintains balance between underwriting profit and
their own financial return
Why an MGA?
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
FINANCIAL
RETURN
UNDERWRITING
PROFIT
11
• Living in a Regulated environment
➢ Insurers, Brokers and MGAs all now regulated by FCA
➢ Insurers subject to Solvency 11 from the EU
➢ Lloyd’s put in place strict rules for delegated authorities
➢New Senior Manager Regime phasing in over next 2 years
• FCA-Financial Conduct Authority key objectives:
➢Secure an appropriate degree of protection for consumers
➢Protect and enhance the integrity of the UK financial system
➢Promote effective competition in interests of consumers
• “
Regulation and Governance of MGAs
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING12
• FCA- “Culture of good conduct” more than good governance and
compliance
• MGAs need to believe in and demonstrate:
➢An ethical culture which fits the organisation
➢Driven by visible commitment from/at the top
➢Well communicated internally and externally
➢Supported by compulsory and continuing education
➢Subject to strong monitoring
➢Supported by- not subverted by- recognition and reward
• The Values + Ethics + Conduct = Culture continuum
Regulation and Governance of MGAs
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING13
• Most MGAs don’t go direct to
Policyholders
• MGAs access most of their
business from Retail Brokers
• Most MGAs underwrite specialty
commercial business for SME
Policyholders
➢ Liability, commercial combined,
commercial motor, financial lines,
marine
• And non-standard and high-hazard
personal lines
MGAs in the Market
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
Insurer
Policy Holder
Retail Broker
Policy Holder
Wholesale Broker
Retail Broker
Policy Holder
MGA
Policy Holder
Retail Broker
Policy Holder
Wholesale Broker
Retail Broker
Policy Holder
15
➢ Since the industry
became regulated
in 2005, the
number of FCA
authorised entities
has almost halved
➢ In the same period,
MGAs have
increased by over
50%
➢ Wholesale broker
numbers have
remained static
0
20
40
60
80
100
120
140
160
180
200
0
1000
2000
3000
4000
5000
6000
7000
8000
JAN
05
JUN
05
NO
V0
5
AP
R0
6
SEP
06
FEB
07
JUL0
7
DEC
07
MA
Y08
OC
T08
MA
R0
9
AU
G0
9
JAN
10
JUN
10
NO
V1
0
AP
R1
1
SEP
11
FEB
12
JUL1
2
DEC
12
MA
Y13
OC
T13
MA
R1
4
AU
G1
4
JAN
15
JUN
15
NO
V1
5
AP
R1
6
SEP
16
FEB
17
MG
A/W
ho
lesa
le
All
Bro
kers
MGA and Wholesale brokers vs Total Broker Market
MGAs Wholesale All brokers
Development of the MGA MarketMGAs as % of market have dramatically increased (factor of 3)
16•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
With kind permission of IMAS
➢ Broker M&A
activity has
significantly
increased, whilst
targets have
decreased
➢ MGA negligible
increase in M&A
activity, whilst
numbers
increasing
➢ MGA numbers
continue to
increase?0
5
10
15
20
25
30
35
2011 2012 2013 2014 2015 2016
Nu
mb
er o
f D
eals
M&A Deals 2011 to 2016
All Brokers MGAs
Linear (All Brokers) Linear (MGAs)
M&A ACTIVITYMGA M&A activity has been increasing, but not as fast
as for brokers generally.
17•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
With kind permission of IMAS
18
Membership of the MGAA
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• Convey the views of its members to UK and European parliaments, government
departments, regulators and other relevant insurance organisations
• Represent members' interests in negotiations with bodies whose rulings,
regulations or controls may impact members
• Set best practice guidelines to assist members in ensuring the stability, security
and reputation of their MGAs
• Assist insurance carriers that support MGAs to maintain the stability, security
and reputation of their binding authority arrangements
• Work proactively to improve the MGA sector's professionalism, stability and
competitiveness
• Create a technical centre providing commentary, information and guidance on
relevant regulatory developments
• Seek opportunities to promote training, education and high standards of products
and services
The Role of the MGAA and it’s
Objectives
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING20
•SHAPING THE FUTURE OF DELEGATED UNDERWRITING
•Q&A
• www.mgaa.co.uk
21
Peter J StaddonChartered Insurance [email protected] 7617 4442