As a result of changes taking place in program business, specialty program insurance providers participating in a recent survey predict that the program administrators and managing general agents (PA/MGA) market will grow in 2012.
“An overall theme that emerged was increased flexibility on the part of the insurance carriers with respect to the classes of business they are looking to write through the program market,” said John Trace, EVP of the dedicated facultative unit at Guy Carpenter & Company.
Changes include the willingness of program carriers to consider smaller programs, larger territorial scope and start-up programs as well as fronting opportunities in order to grow, or at least to maintain, a reasonable market share. About 85 percent of those surveyed are willing to consider start-up programs, while 39 percent will consider fronting opportunities, according to “Poised for Growth: Guy Carpenter's Seventh Annual Specialty Insurance Program Issuing Carrier Survey.”
“More carriers are indicating that they are looking to purchase and own their MGA/PA partners as a means to grow and control their program business. Carriers are seeking smaller "specialty" programs where they can cultivate new relationships in niche areas and participate in the directed growth of those areas,” said Trace who authored the study.
The program marketplace provides insurance carriers with improved results through the specialization, class knowledge and expertise that MGAs and PAs bring to the equation and create efficiencies in production and administration, but balancing profitability with market share continues to challenge carriers writing program business with 57 percent citing maintaining rate level and 41 percent reporting new business production as the largest hurdles.
“We see an increasing push for more technology-based operating platforms as a means to more efficiently, effectively and profitably transact business,” said Trace.
The report includes a summary of market size, dynamics and key challenges, as well as insights into program demands and preferences, operating platform structure, performance management, reinsurance purchasing and growth plans.
Though interest in homeowners programs doubled from last year’s level of 2.6 percent, this year’s 5 percent reflects little interest from the program-issuing carriers to grow this line of business.
“The most surprising finding was the continued appetite for property programs when there appears to be a shortage of property capacity in the marketplace due to the catastrophic events of the past year,” said Trace.
For now, 76 percent of carriers are targeting programs with premium volumes between $5 and $15 million.
“While the excess and surplus business may develop a number of new products each year, there may not be a lot of new program ideas developed and one may see the same type of programs,” said Mike Ardis, director of communications and technology with the National Association of Professional Surplus Lines Offices (NAPSLO) in Kansas City, Missouri.
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