No MGA bubble, multi-year capacity deals the norm – MGAA’s Keating

Long term MGA relationships are on the rise, suggesting more sustainability for the MGA model, according to the MGAA’s chief executive, speaking on the latest Voice of Insurance podcast.

Managing general agents (MGAs) have risen to be seemingly almost everywhere within the insurance sector, inevitably requiring a lobbying voice to represent their community.

Depending on who you talk to, the MGA is touted as the best model for innovative technology, niche underwriting expertise, and more efficient distribution. In the past decade it has become the launch vehicle of choice for fresh insurance startups, with faster speed to market and fewer entry barriers than carriers.

There are still naysayers, of course, especially those who distrust a fee-based business model to underwrite on somebody else’s behalf, and a historically high turnover rate of many MGAs reliant on short-term capacity deals.

It’s fair to say Mike Keating, CEO of the Managing General Agents Association (the MGAA), is likely to be in the cheerleading camp for the MGA, leading the trade body that represents the MGA community in the UK and Ireland.

Technology has transformed the fortunes of the MGA model, probably more in the longer term than the short-term ups and downs of underwriting cycles. Today, MGAs have the “optics and mood” of insurers, Keating suggests.

“But their advantage to capital is that their technology will be state of the art. They will have one version of the truth in terms of their data and their underlying performance, they’ll be able to cut and slice that,” he says.

MGAs tend to be more agile with using data to underwrite opportunities, he stresses.

“It’s not a criticism of insurers; it’s just that they have a growing sandwich of legacy systems, and it’s trying to extract that,” he adds.

MGAs are now “part of the fabric of broker placing strategies”, he says. Brokers see MGAs as on par in some cases above carriers when placing business, he emphasises.

Keating also has a key message for those who doubt the sustainability of the MGA model. “There is no bubble to be burst here,” he says.

That said, MGAs should heed the lessons of previous entrants and exits and “work with their capital” through the market cycle.

“My only caution is the fact that MGA is going into now an – I hate the word softening – a reducing rate adequacy market. It’s important that they retain that muscle memory, that their operation costs are flexible, that they can absorb a reduction potentially in their retained earnings, because premiums are going to reduce,” Keating says.

“In the past, when an MGA tried to grow in a soft market it was always detrimental to its capital,” he says. “They had a fixed cost base, which they needed to meet, and the only way they could do that was pull a new business lever. And there’s only one way that’s going to go wrong – your loss ratio is going to go wrong,” he adds.

As a reflection of a more sustainable MGA market, multi-year capacity partnerships are increasingly the norm, Keating observes.

“The tenure of relationship between MGA and its capital continues to extend. Maybe four or five years ago, the average might be two years to two-and-a-half years. That’s now more than three years and growing,” he says.

This is good for capacity providers, as well as brokers and their clients, Keating emphasises.

“These relationships between capital and MGAs are on a stronger footing”, he explains, adding that “underwriting results are, at minimum satisfactory, but in good form”.

As of March 2025, the MGA has nearly 230 MGA members (of 450 overall members) collectively write around £15bn, or just under $20bn, in gross premium, across 300 product lines.

Host Mark Geoghegan noted the desire for MGAs to know their business is “not in jeopardy” despite the movements of the market cycle, should capacity decide to pull the plug and redeploy. Proven MGAs have ridden the storm of the market cycle, including the soft market period at its worst perhaps five years ago.

“Of course, we want to be in there for three or five years, because we recognise that in any market, you will get your bumps in the road,” Keating says.

Part of this extension of deal horizons is due to realisation that successful MGAs can offer more niche underwriting expertise and distribution that carriers can’t simply replicate by deploying capacity elsewhere.

The US-led rise of ‘hybrid model’ MGAs is also addressed in the episode, with Bridgehaven cited as a prominent example, underwriting and reinsuring its own capacity as well as providing a vehicle for third party capacity providers.

“They have a great reinsurance approach to the individual portfolios of MGAs,” Keating says. “They have innovative financial engineering, they have A-rated paper, so they’re very attractive. They can see pockets in the UK and Ireland that they are confident will provide consistent positive underwriting earnings.”

Keating also outlines what’s on the MGAA’s agenda, in terms of its lobbying work, its educational initiatives, as well as networking and events.

On the educational front, he highlighted member driven content and “a masterclass from [insurer] Zurich”, on how to make a successful presentation for an MGA seeking capacity: what to include in any pitch for capacity; and what not to.

On lobbying, he referred to talks with Lloyd’s to make a case for increasing the minimum tenue of cancellation periods for MGAs at Lloyd’s, known as coverholders in the market.

“My view is that a minimum really should be 180 days,” Keating says.

At present this can be 90 days, he highlights, adding that that for onboarding “in some days 90 days is impossible”, putting a lot of pressure on MGA teams looking for more stability in capacity partnerships.

“What happens now is that MGAs do as much due diligence on their capital as their capital does on the MGAs. You and I have been in the business long enough to remember when that was more one way than the other,” he adds.