MGAs purchase bulk capacity brokers merge programs
Managing general agents (MGAs) are purchasing insurance capacity in larger volumes as market conditions ease, which is altering how brokers arrange these placements. This shift has led to a new approach where brokers consolidate multiple specialized programs under single capacity agreements.
Consolidation of niche programs under unified agreements
Industry experts describe this evolution as a transition from individual program deals to what Geoffrey Lubert, global head of Program Solutions at Gallagher Re, terms “programs of programs.” According to him, this change reflects broader challenges in securing capacity. “We’re more often than not looking at them participating on several of those niche programs,” Lubert said in an interview with Insurance Business. He explained that tighter market conditions force insurers to break down risks into smaller, more manageable segments, with clients seeking coverage for each distinct exposure separately.
Scale advantages for brokers and insurers
The consolidation of multiple programs creates operational efficiencies for insurers and reinsurers, particularly as pricing pressures intensify. When aggregators acquire underwriting operations, previously independent program placements can now be bundled together. This allows brokers to negotiate more effectively by presenting a broader range of risks as a single package.
Traditionally, capacity placements were handled on a case-by-case basis, with each exposure evaluated individually. Today, however, brokers increasingly aggregate these exposures into larger portfolios, which may reduce the frequency with which MGA clients must engage with the market.
Lubert highlighted that this approach helps mitigate potential reductions in profitability or unfavorable terms by leveraging the scale of larger business volumes. “You get some efficiencies in scale so that the reduction in either the profitability and the terms and conditions can be somewhat mitigated by efficiencies in dealing with big books of business,” he added.
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This shift means distributors now collaborate with brokers on full annual reviews covering entire portfolios. Once capacity is secured, it remains in place for the full year, eliminating the need for repeated market visits. “They’re doing one heavy-lift renewal each year where they’re doing a real deep dive on their data,” Lubert said.
Enhanced broker role in portfolio analysis
The new model demands that brokers take on a more active role in helping clients develop strong analytical justifications for capacity providers. Robust datasets and defensible analytics have become essential for distinguishing program business in a competitive environment.
For property-focused programs, this involves advanced catastrophe modeling, loss-ratio assessments, and detailed exposure studies. This shift has expanded brokers’ responsibilities beyond securing capacity to include packaging, analyzing, and presenting these portfolios to potential partners.
Lubert emphasized the strategic advantage of grouping more programs together. “If anything, I would like to put eight of my programs together and buy in bigger blocks of capacity to make the capacity acquisition component of the transaction or my business much easier,” he said. This approach allows distributors to focus on core activities such as product development, loss management, sales, and customer acquisition rather than repeatedly handling capacity acquisition.
