Lloyd’s will struggle to rebuild bridges to ‘resurgent’ US MGAs: Aon
Lloyd's and its syndicates will likely struggle to rebuild bridges to fast-growing US-based MGAs that were burnt in the course of the Lloyd's remediation process, analysts at Aon have claimed.
"We believe that while Lloyd’s will stabilize and return to more regular support of MGAs, the reputational damage will take time to repair," analysts wrote.
Lloyd’s Decile 10 underwriting remediation plan following steep 2017 losses pressed London Market underwriters to cut ties, especially to cat-exposed lines. MGAs have since built new capacity along varied fronts.
"Many MGAs that would have routinely utilized London capacity are now comfortable with their new capital sources," Aon analysts wrote.
Large US domestic insurers, fronting carriers, reinsurers and alternative capital have all been very pleased to step into the gap.
Fronts gained special access on the Lloyd’s withdrawal. Aon claims a record high number of fronting carriers in operation in 2021 and "expect growth in this area to continue in 2022."
"Fronts benefited from the disruption in the Lloyd’s market, which typically supported more challenging classes of business," analysts wrote.
The pie is big enough to fight for following "significant premium boost" from 2019 and 2020. Aon calls the MGA model "resurgent" with market share gains across the property & casualty market, amid a rising number of start-ups.
Aon estimates the size of the US MGA market at $60 to 65 billion, noting that reported MGA premiums from insurers understate full values on account of reporting thresholds.
That could speak to the smaller but dominant side of the MGA market. Some 2/3 of the market is written by MGAs with less than $500 million in premium. Another 12% comes from MGAs with premium tallies between $500m and $1 billion while the over $1b billion club accounts for 22%.
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