Regulation of the MGA sector will increase, but won’t dampen optimism
Market Insight 04 December 2023 04 December 2023
Predictions 2024 - Regulatory
Sector’s ability to show discipline and adapt quickly will see MGA model grow in importance throughout hard insurance market and testing economic conditions.
Legal and regulatory scrutiny of the UK Managing General Agent (MGA) marketplace will increase in 2024. Developments including the implementation of the Financial Conduct Authority’s Consumer Duty requirements, for example, will increase the regulatory oversight of MGAs in the UK – to some extent.
But despite the expected increase in regulation, our most recent temperature check on the UK MGA marketplace, published this autumn, showed that the sector remains vibrant and optimistic. Indeed, the MGA sector, which has always been a magnet for the entrepreneurial underwriter, will benefit from proportionate regulation that is intended to protect customers, many of the respondents to our survey, MGA Opinion Report 2023; Sector Continues to Thrive, believe.
Although there is likely to be a somewhat heavier compliance burden on MGAs next year, the improved standards and behaviours that this will engender and highlight will increase customer trust in the MGA model still further. And while an increase in regulatory and compliance costs may be seen as a barrier to entry for some MGAs, our research reveals that the number of MGA partnerships will remain at current levels or even increase in 2024. This will come as carriers look to buck the previous trend of reducing MGA activity when the insurance market is hard.
MGAs’ heightened focus on risk selection, wordings and disciplined underwriting, coupled with the sector’s ability to use data and analytics and nimbly invest in technology, mean that the MGA model will likely only grow in appeal for carrier backers over the course of 2024.