MGAs are increasingly packaging multiple specialist programs together and securing larger blocks of capacity, reshaping how brokers structure placements as softer market conditions encourage a move away from program-by-program transactions.
Geoffrey Lubert (pictured), global head of Program Solutions at Gallagher Re, said the shift toward what he described as “programs of programs” is becoming a notable feature of the market. Rather than approaching carriers and reinsurers separately for every individual program, larger distributors can group multiple specialist books together and establish broader relationships with capacity providers.
“We’re more often than not looking at them participating on several of those niche programs,” Lubert said, describing the trend as relatively new and naming changing market conditions are one factor behind it.
“As the market contracts and capacity’s much more difficult, you see an unbundling of risk, and people want to insure each pocket of exposure individually,” he told Insurance Business.
Bundling programs can create efficiencies of scale as insurers and reinsurers face greater competitive pressure on pricing and terms. At the same time, consolidation in the MGA sector is creating larger program portfolios. As aggregators acquire underwriting businesses, programs that once approached capacity providers independently can increasingly be taken to market together.
That gives brokers an opportunity to negotiate across a broader portfolio and build deeper relationships between distributors and capacity providers. Historically, Lubert said, program business tended to be arranged “deal-by-deal” or “exposure profile by exposure profile.” Those exposures are now increasingly being aggregated, and the evolution could also change how frequently MGA clients need to approach the capacity market.
“You get some efficiencies in scale so that the reduction in either the profitability and the terms and conditions can be somewhat mitigated by efficiencies in dealing with big books of business,” he added.
One question for the sector has been whether easier insurance and reinsurance conditions would cause distributors to move back toward more transactional placements after relying heavily on larger capacity arrangements during the hard market. Gallagher Re has not seen a significant reversal so far, according to Lubert.
“What we’ve been seeing so far is there’s other value propositions for distribution-based clients to access big blocks of capacity vis-à-vis carriers, reinsurers, alternative,” he said.
Instead of sourcing capacity continuously on a risk-by-risk basis, distributors can work with brokers to conduct a larger annual exercise covering a wider block of business. Once the capacity has been secured, it can remain in place for the year, reducing the need for the MGA to repeatedly return to the market. “They’re doing one heavy-lift renewal each year where they’re doing a real deep dive on their data," Lubert said.
This evolving model puts more emphasis on brokers helping clients build a strong analytical case for capacity providers. Lubert said good datasets and defensible analytics were increasingly central to differentiating program business. For property programs, that could include catastrophe modelling alongside loss-ratio and exposure analysis. For broader portfolios containing several programs, demonstrating how individual exposures interact becomes particularly important.
The broker’s role therefore moves beyond simply locating available capacity toward helping MGAs package, analyse and communicate larger portfolios to potential partners. Lubert said distributors are already looking at grouping even more programs into those arrangements.
“If anything, I would like to put eight of my programs together and buy in bigger blocks of capacity to make the capacity acquisition component of the transaction or my business much easier,” Lubert said, adding that this would allow distributors to focus instead on areas such as new product development, losses, sales and customer acquisition.
Whether that continues as the market softens further will be one of the key tests for the program sector — and could determine whether portfolio-based capacity placement becomes an established part of how MGAs and their brokers approach the market.
