A recent AM Best survey indicates that 70% of respondents anticipate growth in premiums sourced from Delegated Underwriting Authority Enterprises (DUAEs), reinforcing the segment’s role in the insurance industry.
The findings suggest that insurers are prioritizing existing DUAE relationships over new partnerships or acquisitions, emphasizing trust in the performance and scalability of current collaborations.
DUAEs serve as key partners for insurers by offering specialization in niche markets and complex risks. Their expertise has contributed to the segment’s growth, with many insurers relying on these partnerships to access targeted business lines.
According to AM Best, the emphasis on underwriting balance and technology integration highlights the segment’s increasing maturity within the insurance sector.
“Our survey results paint a picture of a segment that is highly valued for its specialization, agility, and adoption of technology,” said Dawn Walker (pictured above), associate director, AM Best.
Survey results show that 70% of respondents expect DUAE-sourced premiums to rise, driven by carriers’ reliance on DUAEs for market access and expanding business lines. Trust in the model has grown in recent years, supporting AM Best’s positive outlook on the segment.
While 25% of respondents foresee no significant changes in their DUAE-sourced premiums, 13% plan to establish new partnerships, and fewer than 10% intend to acquire a DUAE.
AM Best’s analysis suggests that insurers are taking a measured approach to expansion, focusing on maintaining existing relationships rather than aggressively pursuing new ventures. This strategy reflects confidence in the scalability and profitability of established DUAE partnerships.
Survey findings indicate that insurers value the flexibility and specialization of the DUAE model. Approximately 75% of respondents cited the ability to serve niche markets as a key advantage.
Insurers looking to diversify their portfolios see DUAE partnerships as an efficient way to enter specialized business lines, with 31% of respondents highlighting access to superior technology as a factor in these collaborations.
Outsourcing underwriting to DUAEs allows insurers to mitigate high expense ratios while benefiting from economies of scale. Speed to market remains a priority, with 33% of respondents noting its importance in competitive segments.
A smaller group of insurers emphasized the role of DUAEs in innovation and adapting to emerging risks.
The survey also examined the number of DUAEs insurers partner with. Around 45% of respondents provide capacity to a limited number of DUAEs, while 18% have expanded their partnerships to between 10 and 24 DUAEs.
Just over 10% work with 25 to 49 DUAEs. The number of partnerships varies based on an insurer’s size, history with DUAEs, and diversification goals.
Among respondents that do not engage with DUAEs, 75% cited loss of underwriting control as the primary reason. Financial factors, including commission costs, were also identified as barriers.
However, 94% of insurers reported no plans to reduce DUAE capacity, with some carriers considering targeted reductions in specific lines based on market cycles.
Due diligence remains a priority for insurers working with DUAEs. More than 77% of respondents review a DUAE’s business plan and strategy to ensure alignment with their own objectives. A similar percentage examines performance data to assess risk exposure and underwriting capabilities.
Additionally, 60% conduct on-site evaluations of DUAE operations, and 43% perform full audits to assess compliance, claims management, and regulatory standards.
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