Program administrators market remains steady, reinsurance playing increased role

The program administrators and managing general agents (PA/MGA) market showed little change from 2008 to 2009, despite the global financial crisis, according to Guy Carpenter & Company LLC ‘s fifth annual survey of specialty insurance program issuing carriers.
Generally speaking, program administrators, in contrast to wholesale agents, concentrate on being aware of unique risk exposures facing specific target markets.
A managing general agent (MGA) is a person or business appointed by an insurer to solicit applications from agents for insurance contracts or, if authorized, countersign the insurance contracts.
The number of survey respondents who perceived a growing PA/MGA market has declined, although the market outlook generally remains upbeat, the survey found.
Seventy-six percent (down from 92%) estimate the total PA/MGA market to be at least US$20 billion in gross written premium.
Nearly half of all respondents, 46%, felt the PA/MGA market would remain flat, whereas 37% forecast growth and 17% anticipated some contraction. (In the 2008 survey, 32% believed it was flat, 56% thought the PA/MGA market was growing and 12% thought it would shrink.)
As for perceptions about the profitability of the PA/MGA market, 92% of respondents estimated a combined ratio for the market of between 90% and 100%. Forty-nine per cent (down from 68% last year) put the market at 90% to 95%.
Reinsurance continues to play an important role for program issuing carriers, with 37% working with reinsurance intermediaries and 63% using a combination of intermediaries and direct reinsurers.
“This represents a substantial shift from 2008, in which 83% used both intermediaries and direct reinsurers,” Guy Carpenter says in its study.
The structural preferences for reinsurance purchasing also changed, with 33% of respondents preferring quota share, down from 50% in 2008.
Excess of loss grew from 50% last year to 67% in 2009.