July 15th, 2015

Specialty Insurance Programs Poised for Growth and Opportunity in 2015, According to Guy Carpenter Survey

Posted at 3:00 AM ET

Guy Carpenter  today released the findings of its ninth Specialty Insurance Program Issuing Carrier Survey. The survey, which analyzes trends and benchmarks across the Program Administrator and Managing General Agency (PA/MGA) market, asserts that the PA/MGA market continues to thrive, with a positive outlook and growth opportunities expected for the year ahead.

The respondents to Guy Carpenter’s poll represented an even mix of traditional insurance companies that have specialty program operations as well as true, specialty insurance carriers. “Through our nearly decade-long analysis of this market, our goal has been to provide insight into the conditions and sentiments driving program carriers in this vibrant market segment,” said Bill Harris, Managing Director of Specialty Programs at Guy Carpenter.

The size of programs targeted by the respondents in this analysis shows a continuing trend in the market towards smaller programs, with a majority of the carriers (63%) targeting programs with premium volumes between USD5 million and USD15 million.

“As account premiums and program sizes shrink, program carriers appreciate the need to be more flexible in their approach to generating revenue,” added Mr. Harris. ¬†”This year’s survey indicates that program carriers are now considering small programs, larger territorial scopes, start-up programs and fronting opportunities in order to grow profitability.”

Key findings from this year’s survey include:

  • Nearly half of respondents (43 percent) believe the PA/MGA market to be sized between USD30 and USD40 billion, while an equal portion believe the range to be between USD20 and USD30 billion.
  • The challenge of balancing profitability with market share continues for carriers writing PA/MGA program business. Fifty-six percent of respondents cite maintaining rate levels as the largest challenge to the market, followed by new business production (50%).
  • Reinsurance continues to play an important role for program issuing carriers, with 69 percent of respondents indicating the use of both direct reinsurance and intermediaries, down slightly from 76 percent in 2012.
  • Sixty-nine percent of respondents indicate an interest in growing through acquisitions, up from 44 percent in 2012. The vast majority of respondents intend to use company funds or stock to make acquisitions (81 percent vs. 47 percent in 2012). Despite access to bank financing, private equity and venture capital options, respondents show no interest in employing those financial vehicles and would use their own resources rather than outside capital sources.

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