Reinsurance brokerage Guy Carpenter & Company, the leading global risk and reinsurance specialist, announced today it was issuing recommendations on how to succeed in the insurance market as prices decline.

The firm said it was publishing “Optimize in a Soft Market, Succeed in Any Market–Five Strategies for MGAs and MGUs,” a briefing paper for wholesalers, managing general agents and managing general underwriters.

Strategies in the publication, the firm said, would help its readers “maximize opportunities and position themselves for success in the current soft insurance market and beyond.”

The brokerage in a statement said the paper covers the following points:

o Business analysis: MGAs and MGUs by re-examining the products and services they offer, how they are distributed, their value-added proposition and the carriers to whom they are marketed, can make better-informed decisions that will position their firms to outperform when prices rise. The source and execution of a growth plan can be enriched with a combination of introspection and third-party counsel from trusted advisers.

o Operational assessment and enhancement: Streamlining processing and instituting new efficiency measures when profits are squeezed can significantly bolster MGA and MGU profitability. These initiatives can range from new technology systems to streamlining underwriting, claim management and premium audit practices to less costly improvements in the areas of billing, collections and accounting. Managed effectively, these operational enhancements can lead to improved cash flow and profitability.

o Business expansion and diversification: Expanding the business, even in a soft market, can help increase revenues while blocking out competition, especially from new market entrants. Developing new revenue sources by growing existing business lines, adding new lines and classes of business, finding new sources of business, or even a well-planned and timely acquisition can insulate firms in a difficult operating environment and provide a substantial platform for growth.

o Positioning and preparation: MGAs and MGUs should use the current market to position themselves for rapid growth when conditions become more favorable. By searching for and developing new partners in new markets, firms can protect themselves through relationship diversification and benefit from greater alternatives in a hard market.

Likewise, the soft market represents an excellent opportunity for companies to analyze data, both to find soft market expansion opportunities and to plot a trajectory for growth when the market hardens.

o Capitalization and investment: Investing in company growth in a soft market–either through self-financing or the use of outside capital–can have a profound impact on long-term competitive advantage, enabling the acquisition of new systems, distribution, companies and talent, and growing the business without putting undue pressure on margins.

“Soft markets present a number of challenges for MGAs and MGUs, but they can also yield significant opportunities if firms focus on optimizing operations for long-term sustainable growth, rather than short-term profits,” said Carl Bach, managing director and head of Guy Carpenter's Program Manager Solutions Specialty Practice.

He added, “Rather than relaxing underwriting standards and chasing the business cycle, companies would be well served to use the soft market to fine-tune the business for profitability and future returns, regardless of market conditions.”

Mr. Bach said rather than implement all five initiatives at once, “it makes more sense to select only the few that are most likely to yield the largest return.”

The briefing is online at www.guycarp.com. The contact for printed copies is Guy Carpenter at [email protected].

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