But what does this mean for MGAs in UK property? There has been talk of a hardening market for some time and evidence that this has already started to take hold in some markets which can only be a good thing, hardening market = improved profitability and increasing commission values.
Perfect, right?
Hold that thought for a moment and before we draw a conclusion, let’s just look at this from an
insurer’s perspective. They’ve suffered not just the cat event (which in itself usually leads to a
bounce in prices). They’ve also been hit by a dry summer and subsidence; and even the most
prudent inflation assumptions 12 months ago have proved deficient to cover the cost of claims.
They also, in light of Hurricane Ian in Florida, have been hammered with huge rate increases on their catastrophe reinsurance (yes, seemingly unrelated matters merge together in the pool that is international reinsurance capital). The backdrop is that they will be demanding a bigger share of the pie going forward, not just the natural benefit of increased rates. What might their approach be, specifically in relation to their delegated authority business as they look to bounce back from a very tough year and deliver a profitable 2023?
So what may initially present itself as a great time to increase revenue and profits may actually put at risk the lifeblood of your business, your capacity.
No MGA is immune to these risks, but the well managed MGAs are surely the ones with the best
chance of weathering the storm and this is where long-term capacity arrangements with aligned
interests really are worth their weight in gold. In practice this means:
Over time, your performance should stand out from your peers and deliver a level of stability and comfort capacity providers crave. And your reward? Multi-year capacity that goes some way to protecting you from knee-jerk reactions when these market-wide events occur.
Ask a dozen people in the insurance industry what is meant by ‘portfolio management’, and you’ll probably receive a dozen different responses. Dig a little deeper by asking whether they operate an effective portfolio management process, and what that looks like, and you’ll find a stark contrast in responses.
There has been a lot of speculation recently around the use of AI in insurance and how this signals the death knell for Underwriters. Having mopped up the coffee that I spat out and checked my life insurance provisions, this got me to thinking. Surely not all underwriters? But if not, then who?
The ineffable question of the “effs”. What should a business aim for – and more specifically, for us, the underwriting function in an insurance business – efficient operations or effective decision making?
We have all heard of the boiling frog syndrome which says: if a frog is put in boiling water, it will jump out to protect itself. However, if you place a frog in cold water and slowly turn up the heat, it won’t notice the subtle increase in temperature and be boiled alive.
Game theory aims to shed light on outcomes where multiple actors operate. Dry academe often assumes “ceteris paribus” even in social sciences, but in the real world when we are trying to anticipate the outcomes of decisions one actor makes it is essential to consider the possible and likely responses of other actors…
In various parts of our lives, we are examined and tested to grade our ability and knowledge, be that driving tests, ‘A’ levels, or piano exams.
And so it is with the insurance industry. Boards and regulators are increasingly pushing for demonstrable oversight. This is especially true in the field of Delegated Authority (DA)…
Managing General Agents (MGAs) provide insurers a broad opportunity for profitable growth. Operating in niche sectors with lean efficient models and providing customers with products that they often find hard to come by in the mainstream. All of this is wrapped up with the relevant expertise and providing insurers with access to markets that…
What use statisticians and actuaries when the world is being transformed by modern data-analysis techniques? What hope for clunking humans in the era of Big Data (Facebook sells data which influences US presidential elections), of Artificial Intelligence (China can identify disliked racial groups through automatic facial recognition technology)…
Catastrophes – natural events where one “system” (wind, earthquake etc) causes multiple insurance claims in one go – are difficult. Much else in insurance pricing is subject to conceptually simple averaging-over-time, but cats are different. You can’t take a 5 or 10 year history of natural-peril losses and assume you have an accurate view of exposure to catastrophes…
In part 1 of this triptych on insurance pricing we looked at Technical Price (TP): what must be covered over the long run to make reasonable profits. I finished that note by considering TP in the context of the market. Here, I take this theme further and explore more how to think strategically about pricing.
This note covers the fundamentals: the three building blocks of a technical price and a note on the role technical price plays. It is followed with a deeper look at pricing strategies. Finally we consider a knotty topic, cat(astrophe) pricing, in particular the use of cat models to inform the price.
On 26th September 1983, at the height of the Cold War, Soviet missile monitoring picked up apparent signs of five nuclear missiles launched from the US. Retaliation was the default planned reaction.
Charles Dickens opened A Tale of Two Cities with these lines, contrasting calm enlightenment London with turbulent revolutionary Paris: “It was the best of times, it was the worst of times…
Calibrant was established to bridge a gap. The gap is that between MGAs and their carriers. And it finds many forms.