Europe’s MGA market shifts from growth to specialism and discipline: panel

Europe’s MGA market is maturing, but growth remains uneven, highly localised and depends increasingly on specialism, disciplined underwriting and sustainable capacity relationships, an Inner Circle panel concludes.

Key points:
Soft markets put MGA quality to test
Specialism must come before scale
Carrier alignment matters more today

Europe’s MGA market is moving beyond its early growth phase, but the opportunity is becoming harder to generalise. Mature domestic markets, abundant capacity and softer pricing are putting greater emphasis on specialism, underwriting discipline and sustainable relationships with capacity providers.

That was the broad view from an Intelligent Insurer Inner Circle roundtable in Monte Carlo, held in partnership with SiriusPoint on Monday September 7. The discussion brought together Alex Hardy, director of delegated and distribution at SiriusPoint; Tobias Andersson, head of Continental Europe at Howden Re; Paul Dilley, chief underwriting officer and CCO at Bridgehaven; Alessandro Girelli, underwriting manager, London International Market at Descartes Underwriting; Lee Ellis, managing partner, capital solutions at Augment Risk; and Matt Harvey, global head P&C and CPM at Oneglobal Broking. It was moderated by Aditi Mathur, editor of Intelligent Insurer. 

Hardy said changing conditions had brought greater scrutiny to where carriers put their capital and which MGA relationships they support. “We’ve seen a massive shift away from just volume to value, to what’s my point of difference? Why do we exist? Almost, what’s our reason to be?” he said. “In current conditions, I think that becomes even more important.”

Europe is not one MGA market

Any assessment of European MGA growth has to account for considerable differences between individual markets. “If you look at the European market, it’s a collection of markets, and they’re different maturities,” Dilley said. “You can’t say one question answers all.”

Scandinavia and the Netherlands have relatively mature MGA sectors, he said, while parts of Eastern Europe remain much less developed.

Ellis said treating Europe as a single opportunity had been one of the mistakes made during the rush into the region. “Probably 12, 18 months ago, everybody was rushing in. Europe was the holy grail for everybody,” he said.

After investment in teams and infrastructure, some firms are now questioning the likely return, particularly as the market softens and established domestic insurers remain powerful. “People are starting to say, ‘Is the juice worth the squeeze?’ Is the investment we’re making really going to see a return?” Ellis said.

Harvey agreed. “A lot of people are now adding up the frictional cost across the capital and everything that goes with that, and saying, where are we going to be in three years’ time?”

There is still considerable room for growth. Andersson said ecosystems around MGAs were opening up across Europe, with interest from local carriers, entrepreneurs and investors. France and Iberia are seeing considerable activity, while Germany still offers room for further development.

Hardy also pointed to France and Iberia, where much of the activity SiriusPoint sees is heavily specialty-led. “Not trying to go head to head with local markets on exactly the same things is one way of doing it,” he said.

Product can matter as much as geography. Dilley highlighted cyber as a relatively underpenetrated class where MGAs can create demand rather than simply compete for existing business.

Harvey saw similar potential. “Cyber and financial lines, bringing products into markets where there’s low penetration at the moment, is very interesting,” he said. “It’s that level of understanding that the MGAs and some specialists give which can make this sustainable.”

Girelli pointed to other underinsured risks, including subsidence and wildfire, as well as parametric insurance as an area of European innovation. “Europe is showing that it can bring some innovations in specific issues such as parametric insurance,” he said. 

Specialism before scale

As competition increases, the bar for a credible MGA is also rising. Dilley reduced the starting point to the “ABCs of underwriting”: risk selection, pricing and operations. But those basics need to be accompanied by something distinctive.

“It also must have a USP or a specialism,” he said. “You’ve got to get the pricing right, the risk selection right and the process right.”

Ellis said the model of an experienced underwriter leaving a carrier or Lloyd’s syndicate after several profitable years and setting up independently was no longer enough.

“The market has matured. The structure of the market has changed,” he said. “It is about professionalism. It is about those USPs, and it is about having this point of differentiation.”

Profitability remains fundamental. “What differentiates a high-quality MGA is really the track record in terms of profitability,” Girelli said, adding that carrier trust is essential to securing meaningful limits over the medium and long term.

Brokers are also applying more scrutiny. Ellis said opportunities are increasingly being “triaged” before reaching capacity providers, with greater focus on quality rather than simply bringing more business to market.

“With specialism, you can build scale. If you’re just going for scale, you’re just going to become a market tracker,” Dilley said.

Andersson was equally emphatic. “Every day of the week, specialism first, then of course scale to some degree.”

But getting specialist businesses to that scale remains difficult. Andersson said the market could do more to support MGAs starting from zero, while Hardy noted that backing a small project can involve almost as much work as a larger one.

“Not everyone will work,” Hardy said. “It can be a brilliant idea and a brilliant team, and it just, for whatever reason, hasn’t got traction in the market.”

Cycle management is another test. “You need the ability to recognise the cycle you’re in, trade in that cycle and work through,” Dilley said. “High-quality MGAs will prosper through soft cycles and hard cycles because they have strategy.”

Capacity is plentiful, but selective

There is little concern about an outright shortage of capital to support European MGA growth. The question is where that capital goes.

Hardy said carriers continue to ask for the fundamentals: transparency, good-quality data and proactive communication when problems emerge.

That makes choosing the right partner important on both sides. Hardy said selectivity in the current market was not necessarily a negative. “Picking carefully, being quite deliberate about what you do with capital and also making sure that you’re not doing it because everybody else is,” he said.

The intention should be to support opportunities where carriers expect to remain involved “over a number of years”.

Claims are another measure of quality. “A high-quality MGA, as well as delivering profitability, has to pay claims,” Harvey said.

“The MGA market has to pay claims exactly the same way as the wider market,” Dilley added, noting the fact that carriers increasingly have to consider how they engage with MGAs is itself evidence of how far the sector has come.

“The MGA market is here,” he said. “It’s established itself in market cycles and will trade through multiple market cycles. So you can’t ignore them. They’re an inherent part of the distribution chain.”

Europe must find its own model

Regulation remains one complication for MGAs operating across multiple European markets. Andersson said greater consistency would improve efficiency, while Dilley argued that regulation should eventually recognise MGAs more clearly as underwriting organisations rather than treat them principally within a distribution framework.

Hardy said greater clarity still needed to preserve appropriate carrier oversight of delegated business. “If it was easy, it would have been done already,” he said. “I think we’re starting to see some evolution.”

The panel was equally wary of simply importing the US model. “In the US, MGAs had to earn their place,” Hardy said. “They’ve really stuck closely to either solving a customer problem or operating more efficiently. It’s fine to take some inspiration, but it’s dangerous to think that the US way of doing things is right for Europe.”

Different languages, cultures, regulation and datasets make Europe fundamentally different. Girelli noted that while countrywide datasets can make US product development easier, European propositions might require separate datasets across individual countries. “It takes a lot longer to build products if it works all across Europe,” he said.

Looking three years ahead, Hardy hoped to see more smaller MGAs successfully reaching scale and the model becoming more embedded in less-developed areas. Dilley wants specialist MGAs to make deeper inroads against domestic insurers, while Harvey expects technology investment to improve distribution and governance.

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