Accountants’ liability in Germany will skyrocket in 2021
Despite the challenges posed by COVID-19, the mood in the MGA market remains positive heading into 2021. A recent Clyde & Co survey found that the overwhelming majority of carriers and MGAs agree there will be more competition for capacity and a real flight to quality. However, rather than seeing the volume of capacity or the number of partnerships diminishing, two-thirds believe relationships will hold steady or even increase, while over half of carriers think that the impact of COVID-19 will be neutral or even positive for MGA capacity.
Carriers have borne the brunt of the claims and reputational impact of COVID-19, and this has impacted their appetite for new business. Their focus has been on renewals and blue-chip ‘secure’ business. But with carriers losing appetite for anything but standard renewals, bright MGAs have seen an opportunity they will move to seize in 2021. They are already receiving more enquiries and writing more new business, continuing to capitalise on their ability to be responsive to brokers in a market where many carriers have become more cautious.
In reality, the outlook for the MGA market for the coming year can be viewed as binary. We expect that stronger MGAs will do better – they have read the mood of Lloyd’s reform, they have their house in order, they ‘own’ their niche and can deliver for brokers who can’t now always get the underwriters’ attention. Big MGAs will also see an opportunity to increase capacity and accelerate growth. But the smaller players, those with poor claims records or high expense ratios, may struggle to demonstrate their value. As we approach the January 1 renewals, this may translate into challenges renewing capacity, because carriers’ newfound caution cuts two ways – not just in the business they underwrite, but also in extending their paper to MGAs.
Further out into 2021, as market reforms bed in and softer market conditions return against a background of diminishing COVID-19 disruption and accelerating economic recovery, MGAs will remain a popular and efficient business model.