At nearly 12% of commercial lines premiums, Managing GeneralAgents are a growing distribution channel for insurers, accordingto a new study and survey findings from global managementinvestment firm Conning. MGA-sourced premium exceeded $33 billionin 2014, an increase from the nearly $26 billion Conning reportedfor 2012.

In fact, the study, “Managing General Agents: Superior Growth in SpecialtyMarkets,” says that MGA growth has outpaced that of thecommercial lines sector in 2014, despite softening rates in severallines.

Several factors mitigate rate-induced weakening of premiumgrowth, “including a continued shift by insurers towardspecialization and their demand for alternative distributionsources to access the customer,” says Bill Broomall, assistant vicepresident, Insurance Research.

Conning says that this continued growth is sustainable, asspecialty markets are attractive revenue opportunities forinsurers. However, they will assume certain risks as part of theirrelationship with MGAs—most notably, granting underwritingauthority (“giving away the pen”).

Premiums sourced through MGAs also come with certain expenses,such as commissions or profit share, and are higher than otherdistribution options.

State of the Market

Conning’s database indicates that 70% of MGAS underwritecommercial risk premiums. General liability, commercial multiperil,marine (inland and ocean), and commercial auto are the mostfrequently offered coverages.

Both the number of MGAs and the number of relationships thatMGAs have with insurers increased in 2013 and 2014. Conningattributes this increase to the nonaffiliated (MGAs not ownedprimarily by an insurer) market, where nonaffiliates represent morethan 75% of its database, and about 70% of its relationships.

Survey respondents have a relationship with 63 differentinsurers—and 25 of those insurers have a relationship with multiplesurvey repondents.

There is no question that more insurers are entering the MGAarena, but this brings the challenge of how to overcome itspopularity. Distributors welcome greater competition for qualityMGAs and programs who can best serve this market, the studysays.

Conning reports a positive relationship between the number ofprograms that respondents offer, and the size of those premiums.They survey found an even split between the number of respondentswho offer five or more programs, and those that offer one to three.Close to 75% say that the size of their largest program is $10million or more, and 35% report premium of $50 million or more intheir largest program.