Today will go down as one of great historical significance with the inauguration of President Donald Trump – however, as the insurance industry knows only too well, his arrival is merely the latest in a long line of turbulent events that have impacted the markets in recent years and that, it seems, have affected the whole sector.
The latest indication of the impact market conditions are having on the insurance industry comes from the Managing General Agents’ Association (MGAA) which has published its latest MGAA Matters research in association with Castel
Underwriting Agencies Limited and revealed that soft market conditions have replaced regulation and compliance as the primary factor seen as impacting growth in the MGA arena.
The research was based around a survey of MGAA members during December and showed that 65% placed soft market conditions as a top factor impacting growth – well up from 46% in the original survey back in 2014.
Meanwhile, in a mirror-effect, regulation and compliance, which had topped the list in 2014 slipped from 69% to 57% in being rated as a top factor affecting growth. Meanwhile, increased competition in the sector took the third position having been cited by 56% of those responding.
“The fact that regulation and compliance have now dropped to second in the list of factors affecting growth reflects, in my view, the strong investment that has been made by MGAs to ensure they meet regulatory demands,” said Mike Birrell, chief executive officer at Castel Underwriting. “With soft market conditions now taking top spot, there will clearly be an even greater onus on MGAs to maintain the highest levels of efficiency and profitability to meet the needs of their capacity providers.”
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“The fact our members are indicating regulation having a lesser impact on growth reflects the Association’s work with the FCA to build a clear and working understanding of the role of the MGA,” added Peter Staddon, managing director of the MGAA. “We will continue to engage with the regulator to ensure that there is this clarity.”
Several new factors also emerged from the survey including mergers and acquisitions and consolidation in the sector, which was cited by 19% of those surveyed; while 17% saw Brexit as a potential factor.
Despite the negative factors that could affect growth, the bulk of those surveyed did not agree that the UK’s MGA sector will be unable to sustain its current levels of growth and success over the next three years, with just over 21% saying they agreed. A total of 48% strongly disagreed.
They also revealed a host of strategic priorities for the year ahead that seem to reflect a change of emphasis in approach.
Whereas in 2014, 60% of respondents saw moving into new lines of business and products as the main priority, this number was down to 48% this year. Instead, the new priority is on increasing business development and marketing activities (65%), with updating technology and increasing business efficiency also in the top three.
“MGAs remain optimistic about their opportunities to grow and it is no surprise that they are looking to broaden the scope and reach of their distribution partnerships,” added Staddon. “This strategic priority reflects the sector’s product knowledge and understanding of clients’ needs as well as its innovation and entrepreneurial skills.”
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