MGA market maturing, but profitability expectations shrinking: Guy Carpenter

The program administrator and managing general agent (MGA/PA) market is maturing, but profitability expectations within the sector are shrinking, reported Guy Carpenter.
In its annual survey of the MGA/PA market, Guy Carpenter noted the number of carriers entering the space has increased. The number of MGAs shifting to writing speciality-driven lines from more commodity-driven lines has increased as well.
Also, MGAs have become more sophisticated, focusing on more complex commercial risks using cutting edge analytical and underwriting tools, Guy Carpenter said in a release.
But survey respondents indicated profitability perceptions have dropped in the market.
“Thirty per cent estimate a market-wide combined ratio of above 100%, a drastic change of 8% from 2009,” the release continued.
“Last year, 92% of respondents estimated a program market combined ratio of 90% to 100%.
“In 2010, it fell to 71% of respondents.
“This reflects a continuation of last year’s trend of declining profitability, as perceived by survey respondents.”
Respondents cited rate levels as the greatest market challenge. Rates climbed to 71% in 2010 from 64% in 2009 and 58% in 2008.