What is the story about?
What's Happening?
Managing General Agents (MGAs) are facing difficulties due to conflicting expectations from brokers, who demand both carrier-grade governance and rapid product innovation. A survey by Corin Underwriting revealed that 98% of brokers would only place high-hazard risks with MGAs backed by A-rated carriers, while 81% expect MGAs to obtain an AM Best Performance Assessment. These demands create a credibility gap between broker expectations and the realistic capabilities of most MGAs, potentially leading to capacity security issues.
Why It's Important?
The conflicting demands from brokers highlight the challenges MGAs face in balancing innovation with stability. The pressure to meet high standards of governance while delivering niche products could strain MGAs, impacting their ability to grow and adapt to market needs. This situation may lead to increased regulatory scrutiny and higher operational costs, affecting the overall insurance industry. Brokers' reliance on A-rated carriers for high-risk placements underscores the importance of credibility and security in the insurance market.
What's Next?
To bridge the credibility gap, MGAs may need to invest in obtaining performance assessments and strengthening their partnerships with A-rated carriers. This could involve strategic collaborations and increased transparency to meet broker expectations. As regulatory pressures and rating fees continue to rise, MGAs will need to adapt their business models to ensure capacity security and maintain competitiveness in the market.
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