Managing General Agent (MGA)

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Managing General Agent (MGA)

shaking hands represent the collaboration between an MGA and insurance company

What is an MGA?

An MGA or managing general agent is an intermediary company that has delegated authority from an insurance company to undertake tasks like underwriting, binding cover and sometimes handling claims. The MGA acts as an extension of the insurance company, often specialising in niche or complex risks where expert underwriting is needed. Unlike the insurance broker, which mainly represents the customer, an MGA typically operates on behalf of the insurance company.

This method of operating is particularly concentrated at the SME end of the insurance market and thousands of professional firms now buy their professional indemnity insurance through MGAs. Like most insurance companies, most MGAs will only work with insurance brokers to develop their business and do not accept direct enquiries.

Why Insurance Companies work with MGAs

The Insurer / MGA business model has been highly successful in recent years. This is because Insurance companies work with MGAs for several good reasons ;

  • An MGAs expertise in specialised types of insurance means the insurance company doesn't have to develop the same in-house expertise and technology.
  • MGAs underwriting authority enables insurers to expand their reach and stay nimble in the ever-changing insurance markets.
  • The MGA provides an immediate route to market through its numerous broker connections.
  • They allow insurers to expand into new product niches and regions faster, with less operational overhead and lower setup costs.
  • Because MGAs mainly target SME business, this allows insurance companies to focus their own efforts targeting larger risks.

MGA market share

Over 350 MGAs currently underwrite over £ 20 billion general insurance market premiums. They have become an important part of the insurance landscape in the UK bringing considerable additional competition, mainly to the SME sector.

Examples of MGAs specialising in Professional Indemnity Insurance

  • Prosure Solutions
  • Manchester Underwriting
  • Pen Underwriting

Examples of Insurance Companies

  • Hiscox Insurance
  • Aviva Insurance
  • Travelers Insurance

The difference between an Insurance Company and an MGA

An insurance company (or insurer) is the entity that actually takes on the risk and backs the policy financially. It is the insurer which owns the risk and covers the insurance paper. The MGA provides product and underwriting expertise but without the financial risk.

Financial Rating of MGAs

The financial rating of the MGA usually comes from its market capacity provider (the insurance company) and not the MGA itself. For example, at the time of writing Manchester Underwriting’s capacity provider is Great Lakes which A M Best rate as A+ (superior). It's very important to review the security rating of the capacity provider when purchasing a policy with an MGA.