Exploring the growth of MGAs and their surrounding ecosystem

Last year was a landmark year for the expanding global MGA market, with U.S. premiums reaching $128 billion, over 650 MGAs in Europe and a significant presence in the UK.

For eReinsure's Kyle Domire, that means cultivating relationships with this growing community and their fronting paper markets to show how the company supports the MGA ecosystem.

"Our value proposition is a set of processes and controls that make buying reinsurance controllable, auditable and trackable for both the MGA and the reinsurance or fronting partner," Domire says.

"The old way of doing business for an MGA purchasing facultative is to send an email to the market and obtain terms," Domire adds. "It's a very manual process, and there's not always a feedback loop to ensure elements that were discussed were actually implemented."

Instead, using eReinsure, both the MGA and fronting paper have access to the same record, allowing them to see what has been done and with whom. "The value we add is in clarity, audit trail and compliance," Domire says.

Bringing value in fronting and capacity

The growth of MGAs is also creating opportunities for fronting companies and capacity providers to delegate authority to specialist MGAs with established expertise.

"The fronting company is usually very lean and doesn't have a full staff of specialist reinsurance people," says Domire. "The MGA, at the end of the day, wants to write the business. They want to get to a 'yes' as efficiently as possible."

Facultative reinsurance can help when an account falls just outside an MGA's underwriting appetite. An umbrella layer might be $5 million rather than $4 million, for example.

"These special-case scenarios are inherent to the MGA business, where it's 'almost but not quite' within appetite," he says. "That's really where buying facultative reinsurance can get an account across the finish line."

Technology is becoming increasingly important in making that process faster. "Ideally, the technology is there to get them a fast reinsurance quote and quick answers," Domire says. AI could accelerate this further by automating the ingestion of submissions, removing the need to rekey or re-enter information.

Area benefiting from fac and specialist reinsurance

Property and casualty remain important areas for facultative reinsurance, particularly high-risk property exposed to wildfire, older buildings or high-crime areas. In casualty, auto liability is a particular concern in North America, where nuclear verdicts and punitive damages have created significant challenges.

"Buying facultative reinsurance to mitigate some of the auto liability exposure to the umbrella excess layer is a bread-and-butter way to spread the risk of severe auto liability verdicts," he adds.

The growth of specialised reinsurance MGAs is another key trend Domire sees. Teams with deep expertise can leave established carriers and build businesses around their collective experience, creating opportunities for both entrepreneurs and fronting partners.

For eReinsure, supporting these businesses means adapting the technology to their specific requirements.

"A reinsurance MGA has a different workflow from, say, a cedant in agriculture, and we can customise the process for each customer," says Domire. "It's a very dynamic process, and we can tailor our system to fit their needs."