The vast majority of domestic specialty carriers put the size of the program business market at $20 billion or over in a recent survey, and a third of the respondents believes the market is over $40 billion.
Reinsurance intermediary Guy Carpenter published its sixth annual survey of domestic insurance carriers writing specialty program business through managing general agents and other program administrators late last week, and 90 percent of respondents pegged the current MGA/PA market size at $20 billion in gross premiums or higher.
According to a summary of key report findings posted on Guy Carpenter's blog (www.gccapitalideas.com), the 90 percent figure contrasts with only 76 percent putting the market size at more than $20 billion last year.
Those putting the market size at more than $40 billion has doubled since the 2009 survey, when just 16 percent of carriers participating in the specialty program business segment said they believe the market size could be that high.
In fact, 21 percent of market participants now put the size at over $50 billion–a sharp contrast from five years ago, when only 5 percent of a similar group of carrier representatives answered "over $50 billion" among a range of possible market sizes.
This year's survey also revealed that fewer program carriers believe they are part of a growing market than in recent years past. Only 23 percent are forecasting market growth.
This is a new low based on a summary of prior surveys dating back to 2005 reported by NU last year. In 2009, more than 30 percent of carriers surveyed had predicted a growing program business market ahead.
In this year's survey, the most common response was that the market would remain flat, with 59 percent believing this to be the case.
Responses to many other survey questions–about targeted program sizes and lines, the number of programs carriers planned to write in the year, and required MGA/PA services–were generally consistent with prior surveys.
Profitability perceptions, however, have changed dramatically. Thirty percent of respondents estimate a market-wide combined ratio of above 100 percent, in contrast to only 8 percent in 2009.
Guy Carpenter also reported evidence of changing business priorities among survey respondents. Asked to list their top five challenges, 71 percent said "rate levels" this year, compared to 64 percent in 2009 and 58 percent in 2008. The 2010 survey saw only 51 percent indicating that new business production is a challenge, compared to 61 percent last year and 77 percent in 2008.
A new part of the survey this year relates to appetites for acquisitions, with 72 percent of respondents saying they are interested in acquisitions, and 56 percent saying they are targeting MGAs and MGUs. Fifty-one percent also said they are interested in acquiring teams of peoples, and 29 percent said they have interest in carrier deals.
One notable deal in the sector was announced last week, when Bermuda-based RenaissanceRe Holdings said it agreed to sell its U.S. property and casualty business underwritten through MGAs to QBE Holdings. Also going in the $275 million cash deal are RenRe's crop insurance business underwritten through Agro National Inc. and a commercial property insurance operation.
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