Insurance 2022 - the year ahead
MGA market will grow, but traditional capacity should watch its back
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MGA owners are confident the market is set to grow in 2022. Although conversations with capacity providers are likely to remain challenging, businesses which are able to generate a consistent return are looking to the 2022 renewals with confidence, according to our research conducted this year.
2022 is likely to see a continued rise in the popularity of the Lloyd’s market – indeed Lloyd’s is more popular with carriers than it has ever been. Almost half (47%) of the carriers we spoke to believe that it provides the best environment in which to grow and develop MGA business.
Historically, Lloyd’s has seen a lot of program business through MGAs in the US. Delegating authority to access US personal lines or SME business makes sense for those wanting a share of the action in the world’s largest insurance market. Although participation in this business fell back as a result of Lloyd’s remediation focus, our data shows that with rates rising, interest is up. Both carriers and MGAs cite the US as a strong market to grow and develop in 2022.
Europe’s star also looks set to rise next year. In 2021 the proportion of businesses identifying it as the best growth opportunity more than doubled to 13%, a trend which is reflected in our own offices which have seen many more MGA enquiries around exploiting the model for specialist risk and distribution opportunities.
Against this backdrop, the tailwind of capital flooding into the MGA space suggests there may be a pick-up in the adoption of alternative capital, including ILS, PE, reinsurance, investment funds and even MGA’s own capital over the next 12-24 months.
We predict that in the ongoing hard market, insurers in both Lloyd’s and the company market will need to keep a weather eye on the competition to ensure profitable books are not lost to different funding models.