Delegated authority is becoming increasingly important to carriers as underwriting conditions begin to shift across the specialty market. As pricing eases, insurers are placing greater emphasis on distribution rather than relying solely on risks flowing naturally into the London market.
“When markets start to turn and soften a little bit, as they're doing now,” said Charles Rowley (pictured top, right), managing director at DA Strategy, “it means that the business could be less likely to come to London.”
Delegated authority partnerships offer one way for carriers to access business closer to its source.
“One way of enhancing the distribution network is to develop more MGA relationships, particularly from a geographic perspective, so that carriers can have that more local partnership presence,” Rowley said.
Despite global growth, London remains the primary hub for delegated authority business.
While the city and Lloyd’s anchor the market, MGA activity is becoming increasingly international, with Europe, Asia-Pacific and the United States all contributing to the sector’s growth.
“The US was historically where 50% of delegated authority business in London came from,” Rowley said. “It's now dropped to around 40% as DA activity in other markets builds, but it is still the largest contributor.”
Much of the recent development is coming from established MGAs expanding their underwriting capabilities rather than a surge of entirely new startups.
“That's what we've seen a little bit more of in the last year,” Rowley said, “not new startups, but existing MGAs broadening their underwriting teams.”
Specialty lines remain the dominant focus, often built around highly specific underwriting expertise in tight niches. “Underwriters who have very narrow and deep niche knowledge who can deliver real value to clients and are determined to set up their own businesses,” are a major focus, Rowley said.
However, some classes are becoming increasingly crowded. “Places like cyber, I think, are a little bit overpopulated at the moment,” he said. “So unless you've got a really good USP, those are areas that I think we're seeing becoming a bit more challenging.”
As MGAs grow, founders are becoming more deliberate about how they structure capacity relationships. A key priority is avoiding dependence on a single carrier and building a broader panel of core partners.
“You don't want to be reliant on one carrier,” Rowley said.
Diversifying capacity provides resilience if a carrier withdraws from a class or changes strategy, particularly as MGAs expand into additional specialty lines.
“Ideally, an MGA should develop four to five sets of deep carrier relationships, all of whom could lead the class of business that they're looking to underwrite,” Rowley said.
Founders are also structuring their businesses with different long-term goals in mind. Some aim to build independent firms over time, while others position their MGAs for eventual exits through strategic partnerships or trade sales.
“If you're at a point of looking to sell, [you may] want to find the best commission offerings from a particular carrier, and focus on that in the short term,” Rowley said.
Investment models vary widely across the sector, ranging from founder-owned businesses to minority investor backing and incubator platforms. As MGAs expand, additional capital is often required, particularly when firms bring in new underwriting teams.
“To bring in a new underwriting team, you're going to need somewhere in the region of between one and two million pounds of capital to cover the ‘J curve’,” Rowley said.
As delegated authority expands, oversight among follow markets is becoming a growing focus for the London market. Rowley points to research from the Lloyd’s Market Association highlighting the scale of follow capacity supporting delegated authority business.
“There are a lot of followers out there in the market and a lot of those followers are happy to follow strong lead MGAs as much as they are happy to follow the underwriters in the lead syndicates,” he said.
However, many follow markets are still struggling to define the appropriate level of oversight. Rather than replicating the work of lead carriers, Rowley argues they should focus on understanding how those leaders manage delegated authority.
“What we suggest is that followers need to do is to tailor their delegated authority oversight to their role,” Rowley said. “Ideally getting a clear understanding of what the leaders on those delegated authorities are actually doing, rather than trying to replicate it. It is difficult to balance speed of engagement with oversight needs, especially in a follow role.”
For lead carriers, delegated authority also brings significant operational responsibility when onboarding and managing MGA relationships.
“There is a lot of work involved in taking on a new MGA or coverholder, and there is a lot of work involved in overseeing it,” Rowley said.
That role, he argues, should be recognised more clearly across the market. “I actually think there is a genuine need for recognition of that, and possibly for lead fees,” he said.
More broadly, Rowley believes the market must invest more heavily in delegated authority expertise if the model is to scale effectively.
“What we constantly see in the market is a lack of investment in building your delegated authority team,” he said. “There's a lot of investment in underwriting, there's not enough investment in delegated authority expertise in the marketplace.”
Without that investment, he warns, the market risks inconsistent oversight as delegated authority continues to expand.
“Follow DA underwriters can either massively overcook it or massively undercook it,” Rowley said. “And that is where our market needs to develop its thinking further.”
