Outside capital, PE funding and specialization are among the factors driving growth and confidence in the MGA and MGU market, Bridge Specialty Group president Stephen Boyd said at a WSIA drinks reception hosted by Insurance Insider US.
At the event, the executive said: “We're clearly not just in the Golden Age of E&S, but we're absolutely in the Golden Age of the MGU.”
However, the external capacity coming into the marketplace funding new delegated underwriting authorities (DUAs), MGAs and MGUs has yet to be tested, Boyd said.
“It’s not necessarily the ability to pay the claim. It's the willingness to pay the claim when a true cat event occurs,” the executive said.
“There’s a lot of folks enamored with all this capacity that's flowing in, but it hasn't truly been tested.”
A potential new trend heard in conversations with the industry at the WSIA gathering this week is partial acquisitions of MGAs.
“When you're a $15bn insurer and you've got a potential opportunity for a $50mn product, you may not really get the technology funding [or] the reinsurance support behind it,” Boyd said.
“All the operational stuff we have to do to get that up and going – the MGA outfit is actually very good.”
He continued: “In a lot of different ways, it’s not necessarily just a lift out. Sometimes it’s a carrier actually coming to us, or some of our competitors, and saying they actually can really take off here and we’ll be the risk bearer behind it.”
E&S market
Boyd said E&S growth will likely continue, but not at the double-digit pace the market has seen in years past.
“Are we going to continue to see 15%-22% growth? Probably not, but I certainly don't see anything showing up at least the next 18, 24, even 36 months to indicate we're going to see a massive turn back,” he said.
The executive highlighted that casualty will likely fuel some of that growth, factoring in many of the external trends impacting the space.
“There's a lot of business that's flown over [into E&S, which] will probably not come back,” Boyd said,
“In terms of climate risk, political risk, social inflation, legal system abuse – there's so many things out there that are going to drive that business to be sticky in the E&S space.”
He continued that the E&S market has become more specific, both on a segmental and geographic level.
“The old days of a hard and soft market cycle, and the big swings in and out are gone,” the executive said. “It's very episodic, it's very segment-specific, it's geographically specific.”