As the MGA market continues to grow, with significant development across specialty lines such as parametric insurance, climate risk, and emerging technologies, calls from the insurance community for a bespoke regulatory framework heighten. Research from Corin Underwiring shows that 68% of the 147 brokers surveyed support the decision for the FCA to implement a dedicated regulatory framework for MGAs, emphasising a need for increased operational clarity to ensure they remain compliant. “67% of brokers indicated they would be more inclined to work with MGAs if such a framework were introduced” (Corin: Call for MGA specific regulation gains broker support).
Marking a 90% cumulative growth since 2020, the MGA market reached $109.2 billion in direct premiums written in 2024. In terms of loss adjustment expense (LAE) ratios were 1.9 points lower than the overall property/casualty market in 2024, showcasing MGAs expertise and efficiency in managing risks. Many argue that due to the flexible and adaptive nature of MGAs existing regulations need to be strengthened to ensure the sector’s continued growth protects customers, which will further increase trust in the model. On the point Mike Keating, CEO of the Managing General Agent’s Association says “A tailored approach, once fully evaluated would assist in enhancing transparency and operational clarity and strengthen the confidence organisations have when partnering with MGAs. This is a vital step towards ensuring the regulatory landscape evolves in line with the innovation and value MGAs continue to bring to the market” (Insurance Age: MGAA boss Keating weighs in as broker survey backs dedicated MGA regulation).
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A dedicated framework could move MGAs out of a regulatory grey area, unlocking new opportunities for growth and efficiency. Understanding the potential changes is the first step toward leveraging them for a competitive advantage. Below we consider what a bespoke regulatory framework might mean for MGAs.
Potential benefits for MGAs
A purpose-built regulatory system could offer significant advantages, empowering MGAs to operate more effectively.
1. Enhanced clarity and reduced ambiguity
A clear set of rules designed for MGAs would eliminate the need to interpret regulations intended for insurers. This would reduce compliance burdens and legal uncertainties, allowing them to focus more on core business activities. With less ambiguity, MGAs can operate with greater confidence, knowing they are meeting specific, relevant standards.
2. Greater operational freedom
Currently, MGAs operate under the delegated authority of their carrier partners. A bespoke framework could provide MGAs with more direct regulatory standing, potentially allowing for greater autonomy in areas like product innovation and distribution strategies. This could speed up time-to-market for new offerings and allow MGAs to respond more nimbly to changing customer needs.
3. Increased credibility and trust
Formal recognition through a dedicated framework would enhance the credibility of the MGA sector. For capacity providers, this means greater assurance in their MGA partners. For clients, it signals a well-regulated and stable market. This heightened trust can make it easier to attract top-tier talent and secure long-term, stable carrier relationships, which remain a top priority for MGAs.
4. Enhanced innovation
A tailored framework could be designed to encourage innovation. By setting principles-based rules rather than prescriptive ones, regulators could create an environment where MGAs can experiment with new technologies, data analytics, and business models without being hindered by outdated regulations. This is especially important as InsurTech continues to reshape the industry.
Challenges and strategic considerations
While the benefits are compelling, the transition to a new framework would not be without its challenges. It will be essential for MGAs to plan ahead to navigate changes successfully.
1. Increased compliance costs and scrutiny
Research shows that a bespoke framework would likely come with its own set of compliance obligations and direct regulatory oversight. This could mean increased costs related to reporting, staffing, and systems. MGAs, particularly smaller ones, would need to assess their resources and prepare for potentially higher operational expenses. The key will be to invest in scalable compliance solutions that can adapt to new requirements efficiently.
2. Navigating the transition period
Any change of this magnitude involves a transition period filled with uncertainty. MGAs would need to stay informed about proposed changes and actively participate in industry consultations to help shape the new rules. Developing a transition plan early that outlines potential impacts on operations, technology, and partnerships will help to ensure a smooth adjustment.
3. Redefining carrier relationships
A new framework could alter the dynamic between MGAs and their insurer partners. While it may grant MGAs more autonomy, it could also require a re-evaluation of delegated authority agreements. Both parties will need to work together to redefine roles and responsibilities, prioritising transparent communication.
How MGAs might prepare strategically
Whether a bespoke framework is on the immediate horizon or a long-term possibility, there are steps firms can take now to position themselves for success.
Tighten governance and risk management
It’s important for MGAs to strengthen their internal governance structures and risk management protocols. This might include improving how underwriting guidelines and claims handling procedures are documented, ensuring additional detail and information is recorded. Demonstrating robust self-regulation will not only build trust with partners but also prepare MGAs for any future regulatory scrutiny.
Technology and data investment
Modern, flexible technology is the backbone of a successful MGA. Investing in scalable systems that can support sophisticated data analytics, streamline compliance reporting, and enhance operational efficiency is critical. A strong tech stack will make it easier to adapt to new regulatory demands while unlocking insights that drive business growth.
As the MGA market continues its impressive growth trajectory, with projections showing that the sector could reach over $30 billion by the end of 2025, the discussion around a bespoke regulatory framework for MGAs is a sign of the sector's maturity and importance. While the path to implementation may be long, the potential for a more stable, innovative, and efficient market is significant. The need for a regulatory structure that supports, rather than constrains this dynamic sector will be key in ensuring MGAs continue to thrive.
If you’d like some intel on the insurance and MGA market, specifically in terms of employment and M&A opportunities, don’t hesitate to contact one of our insurance consultants.
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