Pro MGA Solutions CEO delivers update on what's impacting the MGA market

How is the high-inflation environment impacting MGA development and scaling?

Pro MGA Solutions CEO delivers update on what's impacting the MGA market

Insurance News

By Mia Wallace

You can’t have sunshine without a little rain, as the old song goes – and Danny Maleary (pictured), CEO of Pro MGA Solutions, can attest that the saying holds true for the MGA market. As an MGA incubator platform, Pro MGA Solutions works closely with a diverse range of clients, supporting their transition from a conceptual idea to a fully operational business.

But in addition to the time spent curating the evolution of its internationally-spread existing client base, the team is also kept busy finding new opportunities to nurture innovative, entrepreneurially-minded firms. Pro MGA Solutions has taken on an additional 12 clients this year, he said, and now supports 41 MGAs across the UK, the EU and North America.

“We’ve got $650 million of gross written premium currently under management based on their forecasted projections for 2022,” he said. “We’ve got 29 classes of business, representing a good blend of insurance, reinsurance, insurtechs, traditional quality underwriting MGAs and a few consumer propositions. So, we’ve got a nice blend in terms of our client matrix, which has been quite healthy.

“And what’s underpinning a lot of that is the continued rollout of our multi-territorial strategy [in line] with our desire to have a number of strategically placed MGA incubation models scattered around the globe. So, that’s Europe, the UK, the US and we’re just about to launch in Asia with a partner and our first MGA, and we’re also looking at LATAM as well. That’s in addition to spreading out a bit more in Europe – with a move into Southern Europe as well.”

Working across so many different classes of business and locations has given Maleary a keen insight into the challenges pressing on the MGA market and he noted that top of the agenda for MGAs remains the question of securing risk capital. Finding the right risk capital partner is the biggest challenge across all classes and territories right now, he said – and several factors go into determining the right partnership, including an aligned approach and vision, and a longer-term approach to success.

Meanwhile, while the regulatory framework has become slightly tougher, for businesses that are structured accordingly it’s a case of following the process. This is where Pro MGA Solutions’ offering really comes into its own, he said, as the team has spent significant time ensuring its oversight frameworks are robust and meet, if not exceed, regulatory requirements in every territory in which they operate.

“As to how the high inflation environment is impacting MGA development and scaling, a lot of that is happening around the investment side and the working capital element of it more than anything else,” he said. “[It’s] around the control of costs and ensuring that costs are not spiralling out of control in terms of whether that’s general salaries or general servicing fees, or costs for IT and technology.

“I think a lot of it hasn’t really hit home yet. And I think we’ll probably find as we come through the remainder of 22 into 23, what we’ve all been experiencing around inflation will start to bite and there’ll be more focus around cost management and more focus on embracing things that will help to streamline that.”

It will be interesting to see what happens on the investment side of things, Maleary said, as the current lay of the investment landscape depicts a positive outlook for MGAs. He is seeing this environment as extremely robust in terms of entities looking to invest in MGAs in multiple ways – whether that’s angel investors, private equity, venture capital, or institutional investors.

“There still seems to be some significant options out there,” he said. “But as we go through the remainder of this year and into next, we’ll just have to wait with bated breath to see how that’s impacted because of what’s going on in the world around inflation.”

As it stands, Maleary said, the appetite of risk capital partners to embrace the MGA route to market is a real opportunity. He has seen a “significant increase” in the opportunities available for MGAs to partner with risk capital partners which are really thinking about their own growth strategies and who understand that the MGA proposition is a key part of that.

“Despite what you might call hard markets in some areas,” he said, “I’m still seeing strategic relationships being built with a number of MGAs during that hard cycle, which I think is good and robust and a healthy thing for a risk capital partner to do. I’m seeing that with more partnerships wanting to be created, not just between the MGA and the insurer, but also the reinsurer.

“I’ve seen quite a lot of coming together and like-mindedness around creating a proposition that is streamlined, perhaps light-touch, cost-effective but able to deliver good, quality profitability and ultimately a good, quality service and proposition to the customer. And the MGAs that have entrepreneurial flair, that are a bit more innovative and that are happy to partner accordingly… I think, they’ve got significant opportunities to create long-term relationships.”

Pro MGA Solutions prides itself on taking a partnership-first approach to growth, and Maleary noted that to him a great partnership is about being aligned, transparent and trusting. With his deep-rooted history and experience in the MGA market, he is able to guide firms along every step of their strategic journey, he said, and offer real guidance on what they should be looking for as they shape their medium-to-long term vision.

Critical to his team’s approach, he said, is finding the right MGAs to partner with and while Pro MGA Solutions is designed in such a way as to be everything to everyone, the company has a careful selection process. That’s of paramount importance as it keeps that partnership-first approach front-of-mind throughout the entirety of the relationship – and it’s a model that has worked very successfully to date.

“We’ve had a busy 2022 already but we’ve a few more things to do in the remainder of the year,” he said. “We’ve got a bit more strategic growth to do, a bit more positioning as we go into 23. We’ll probably have a few more clients come on board, I anticipate we’ll end up securing 15 clients in total for the whole of 22, which is a similar number to 21. So, we have a very healthy pipeline reflecting that this is a very healthy market when it comes to the world of the managing general agent.”

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