Time for a actuality test… | Remark

And we are not ashamed to have been strong advocates – even cheerleaders – of an MGA and program space that has seen a growing maturity and sophistication coincide with rapid growth.

But all is not positive in the outlook for the sector as 2023 approaches, with testing times ahead for some market participants.

Our recent coverage has had a strong focus on the fast-developing capacity crunch affecting the property cat market, with concerns that other lines of business will also be affected as insurers and reinsurers shift appetite and make decisions around deployment.

Anecdotal evidence points to many of the MGAs reliant on cat capacity treading the pavements of London and Bermuda in an increasingly frantic attempt to nail down support for next year in fear of missing generationally hard pricing and terms.

Availability of property cat insurance capacity will be driven by availability of property cat reinsurance and retro capacity.

And at the moment that vertical value chain appears frozen, leaving the market in limbo.

The stasis has reached a point where leadership at reinsurance brokers are publicly calling on reinsurers to stand up and quote.

As our sister publication The Insurer reported last week, Andy Marcell, CEO of Aon’s Reinsurance Solutions arm, pleaded with reinsurers to accelerate the submission of quotes to ease “friction and uncertainty” ahead of what threatens to be a late and potentially chaotic 1 January renewal season for many buyers.

As we wrote in last month’s editor’s letter, reinsurance has been one of the main engines of the booming MGA market.

But for now at least it is running on reduced cylinders and in property cat the spark plugs aren’t even firing.

Untested talent

The challenges for MGAs in the fallout are very real. For some they could even be existential.

One hurdle to overcome is the lack of experience many in the sector have in navigating these shifting conditions.

“Talent crisis” are two words around plenty thrown in the broader P&C sector.

Although there have been admirable efforts by many companies to attract and nurture young talent to produce the next generation of brokers and underwriters, there is a clear experience gap where many active in the space have not had to deal with some of the challenges now being thrown. at them.

Where the challenge in the booming market – particularly in E&S – has been hiring enough talent to manage the flow, now it is about having older heads to help navigate a capacity crunch.

That talent is not easy to find but could be increasingly critical in the coming months.

It is not just underwriting and broking talent that is facing a tough test in the current environment.

Winners and losers in the fronting space

Cracks are beginning to emerge in the hybrid fronting carrier space.

Here there has long been a sense that there would be winners and losers in an increasingly crowded market segment where the imperative to grow for some had seen a large number of programs on board in a relatively short period of time.

There have also been concerns about over-concentration in program portfolios.

And news revealed by our sister publication The Insurer Just before Thanksgiving that Tradesman is moving its flagship construction general liability program from Accredited to Clear Blue highlights the fragility at some of the cohort fronting carriers that have emerged in recent years.

Prior to the move, New York-based Tradesman is understood to have generated around $325mn of premium in 2022 across its book of programs, the majority of which were written on accredited paper.

The construction GL program alone is thought to account for over $200mn in annual premium and is growing fast.

Although it is expected to retain other Tradesman programs for now, the loss of its largest single deal in the US is a major blow to R&Q-owned Accredited.

The parent company has been going through its own trials and trials of late. Its share price has fallen to an all-time low amid activist investor battles, leading to concerns over a potential capital squeeze.

For the fronting business Accredited that uncertainty is having a tangible impact. There may now be growing fears that other counterparties will look at their relationships more closely, which will further challenge retention of business.

The move shows the potential in a transitioning marketplace for some to prosper as others suffer.

But there are still plenty of opportunities, of course.

In this issue we report on growth opportunities in construction, cyber and renewables among other areas of promise for the sector.

We hope you enjoy the read…

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