The rapid growth of the MGA sector has created new opportunities for specialist underwriting businesses, but it has also brought greater scrutiny from insurers and regulators.
Delegated underwriting authority allows MGAs to operate with significant autonomy, but it also places responsibility on those businesses to demonstrate that underwriting decisions are being made with appropriate discipline and oversight.
For Paul Bennett (pictured), underwriting director at NBS, governance expectations are increasing across the market, and he believes that is ultimately positive for well-run MGAs.
“Yes, governance expectations are placing greater pressure on MGAs, but I think that’s a really good thing,” Bennett said.
As insurers provide underwriting capacity to delegated authorities, they must have confidence that those partners are managing risk and compliance effectively.
External audits now play a central role in how insurers assess the performance and governance standards of MGAs.
Bennett recently oversaw a detailed review conducted by one of NBS’s insurer partners, examining underwriting decisions, documentation and compliance procedures across the business.
“We’ve got about 60,000 policies on cover,” he said, noting that the audit process took several months to complete. The review ultimately resulted in a compliance score of 91%.
For Bennett, the importance of these audits lies in demonstrating that underwriting discipline is embedded within the business rather than simply discussed during meetings with insurer partners.
“It’s not just me talking when I’m seeing them and saying, ‘We’re doing X, Y and Z.’ We are actually doing it,” he said.
Bennett believes the increased scrutiny around delegated underwriting authority will ultimately strengthen the MGA market by highlighting the difference between well-run businesses and weaker operators.
“The best MGAs will thrive because of it. The ones that are weaker won’t,” he said.
Insurers themselves face increasing pressure from regulators and shareholders, meaning they must ensure delegated underwriting arrangements are tightly controlled.
This has placed greater emphasis on internal audits, compliance processes and underwriting oversight within MGA organisations.
At NBS, internal file audits review hundreds of policies each month to ensure underwriting decisions remain consistent with agreed guidelines and regulatory expectations.
Like many MGAs in the sector, NBS has grown rapidly in recent years, expanding from around £20 million in gross written premium six years ago to approximately £115 million today.
However, Bennett said rapid expansion can expose weaknesses if operational infrastructure does not develop at the same pace.
“It’s great to grow, it absolutely is, but if you do it too fast and you fall over, it can all become for nothing,” he said.
As MGAs scale, Bennett believes investment in systems, compliance teams, project management and operational oversight becomes increasingly important.
While these functions may not directly generate revenue, they play a critical role in ensuring the business can maintain regulatory standards and support continued growth.
Ultimately, Bennett believes the success of any MGA still depends on maintaining the confidence of its insurer partners.
Delegated authority arrangements rely entirely on insurers being willing to provide underwriting capacity. Without that trust, even rapidly growing MGAs can struggle to sustain their business models.
“If the insurer is coming to me and telling me to do X, Y and Z, I’ve failed,” Bennett said.
Instead, MGAs must demonstrate that they are proactively monitoring underwriting performance, adjusting portfolio strategy and maintaining transparency with capacity providers.
