Pro MGA sees 2024 as year of territorial expansion

Buoyant managing general agent sector harbours desire for multi-regional scope, company’s chief executive says

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September 14, 2023

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This interview was originally published in Insurance Day, and is shared here with permission and thanks. Read the original here

The managing general agent (MGA) sector is booming to the extent its participants’ ambition to be multi-territory entities is increasing, according to the chief executive of Pro MGA Global Solutions, Danny Maleary.

In an interview during the annual meeting of reinsurers in Monte Carlo, Maleary said his independent MGA incubator and programme platform therefore has plans to expand far beyond its bases in the UK, the US and Germany.

“Within the next 12 months, we expect also to be in Canada, Spain, Sweden or Norway, Mexico, Singapore and Israel. That means we will have platforms that are live and supporting clients in the UK, Europe, North America, Latin America, the Middle East and Asia,” he said.

Maleary formed Vibe MGA Management in 2016, which was acquired by Pro Global three years later and rebranded as Pro MGA Global Solutions. It now has $1bn of gross written premium under management in 29 classes of business, manages 30 clients at 43 MGAs and is on track for 60% growth this year compared with 2022, he said.

“We’re seeing seven to 10 new opportunities a month and we have 41 opportunities currently in the pipeline, which is really robust, and our declinature rate has dropped from 80% to 60% because the quality of MGA business plans is becoming much better.”

To him, quality means “a framework of operational resilience”. The components of this are a three-year business plan and five-year vision that can be “tweaked accordingly”. The vision must be both innovative and acquisition cost-cutting as well as have a distribution strategy that is aligned with customers’ needs and is profitable for stakeholders. Experience is key, he added, but none more so than technological entrepreneurship.

The “European opportunity” for MGAs has been particularly stark, with Pro MGA Global Solutions setting up more than 25 in that region in the past 12 months. There have been two themes, Maleary said. The first is offering monoline optionality.

“For example, you could have a warranty and indemnity proposition and offer tax or contingency as embedded or as standalone products. In other words, break up the package into monolines,” he said.

The second theme is attracting international risk capital. “The hard market means local insurers are writing less business but for more premium and local distribution is sourcing and needs fresh capital to come into Europe to be able to supplement what’s been lost,” he said.

The “back to basics” mantra among reinsurers this year – writing less because they are earning more – is an opportunity for other risk capital providers to enter a territory, Maleary said. “However, it’s also a dangerous strategy to be embracing because reinsurers could attract competition to fill the gaps [they leave open].”

For MGAs, “back to basics” means staying true to their value proposition rather than creating “periphery” products that risks underserving their clients. An “exciting” way some MGAs are offering to add value next year, he added, is in embedded insurance, which “takes the pain away” for the customer.

Above all, the excitement for Pro MGA Global Solutions from incubating MGAs is the vast scope of this sector, Maleary said.

“There are traditional opportunities geared to what cause us concern in our day-to-day lives, like our cars and pets, and there are opportunities to support what the world will be doing decades from now, like carrying cargo to Mars.”

From Pro MGA Global Solutions, an MGA gets a “true partner” that helps them move “seamlessly” into regulatory territories, Maleary said. “Incubating” an MGA means supporting it on a three-year journey towards becoming a standalone entity.

Maleary said: “I sit as a non-executive director on most of our clients’ boards. I have a regular one-to-one meeting with the CEO. We have monthly operational meetings, quarterly oversight meetings and a yearly audit. It sounds intrusive, but it isn’t because it helps them prepare to become fully authorised in their own right.”

In the UK, that journey is through the Financial Conduct Authority’s (FCA) appointed representative (AR) regime. As an AR – also known as an intermediary, principal firm or regulatory host – Pro MGA Global Solutions extends the FCA “regulatory permissions” to its clients to enable them to trade.

“We’ve digitalised our regulatory oversight so we can see in real time what our MGAs are doing to ensure they’re conforming to the FCA’s processes, policies and controls,” Maleary said.

“By the time we reach the point of making an application for one of our clients to become fully authorised, the FCA will know they’ve been operating for a number of years under our umbrella, within a framework that is conducive to becoming fully authorised as a business,” he added.

Australia’s and Gibraltar’s regulators follow a similar approach to the FCA but the AR regime “doesn’t exist” in other territories where, instead, “you’re either fully authorised or you’re not”, Maleary said.

He continued: “In the US, you either leverage our platform to trade and we trade as your brand or we work with you in establishing your own ‘agency’, as it would be known in the US, and we get you licensed accordingly. You would pop out of our MGA and into your own and then we would wrap a support framework around you, both from a regulatory perspective and an expertise perspective, to enable you to trade. We would hold your hand on your growth journey until you are able to do it on your own.”