This is part 1 in a two-part series covering the growth of specialty programs.
The insurance industry has been transformed by the rise of managing general agents (MGAs) and specialty programs.
As intermediaries between insurance carriers and brokers, MGAs have carved out a growing share of the market by offering specialized programs, unique underwriting capabilities, and innovative solutions tailored to specific niches.
Growing demand for specialty programs was evident at the 24th Target Markets Annual Summit in Scottsdale, Ariz., where around 1,700 insurance professionals converged earlier this month.
MGAs and fronting carriers alike spoke to the increasing interest and opportunities in the programs space, with carrier capacity expanding in many segments.
“We see pockets of growth opportunity in most of our programs,” said Brian Norman, president of Starwind Specialty Insurance Services, one of the largest program management operations in North America.
The one exception for Norman, however, may be real estate professional programs, where interest rates have driven transactions down. “There’s a little bit of shrinkage there,” he said.
However, Norman expressed excitement over some of the new spaces Starwind Specialty is entering. The company, which was formed in 2021 from a marriage of CRC Group's Specialty Programs and Constellation Affiliated Partners, recently brought on teams in the cannabis space, political violence and terrorism, extended warranty and environmental.
“Environmental is particularly interesting due to so many of our existing insureds having environmental exposures that we've historically not covered or placed through the open market,” said Norman.
Shawn Woedl, CEO of ReInsurePro, praised the “huge opportunity” in specialty programs in construction. He said that while the past 18 to 24 months were “difficult” due to the hard property market, things have started to change.
“As more and more carriers begin to change their appetite, it provides an opportunity for us and our retail agent partners to drive more business into our program,” said Woedl. “We're seeing more new construction opportunities than we have in the past four years, as well as both cosmetic and structural renovations on existing structures.”
Capacity providers are also bullish on opportunities to expand their expertise by partnering with MGAs.
“From an opportunity standpoint, we're pretty agnostic when it comes to lines of business,” said Chris Kelleher, co-president of Ryan Specialty National Programs. “We're more interested in finding folks with expertise in particular classes of business and bringing our infrastructure, distribution and carrier relationships to bring products to the marketplace for our customers.”
For Norman, the most significant challenge for program managers lies in two entwined factors: data and capacity.
“Quality data has become table stakes in the quest for capacity. So, it has to be at the forefront of all strategic plans,” he said. “Capacity and capacity relationships are key to long-term growth and launching a new product.”
Taking the initiative to address capacity issues, Starwind Specialty this month launched a casualty sidecar, Fractal Re, in partnership with Stone Point Credit. The multi-year, $270-million reinsurance agreement aims to provide capacity to Starwind’s diversified casualty portfolio.
“We wanted to demonstrate complete alignment with capacity partners by being shoulder-to-shoulder in risk participation,” Norman said of the launch.
At the same time, the pressure of getting products to the market quickly enough remains a significant challenge for MGAs.
According to Manuel Almenara, vice president of carrier relations at vQuip, speed-to-market is everything. “The specialty and E&S spaces allow more dynamism, with fewer regulatory constraints, but launching a program quickly still requires intense alignment among the program manager, carrier, and reinsurers,” he said.
While it can be time-consuming, it doesn’t have to be. Almenara noted that vQuip launched a program last year in just four months. “That’s a huge win, especially for a program manager with limited resources, and it highlights the value of working with partners who can keep up the pace,” he said.
Amid the tremendous growth of programs, it can be challenging for brokers and agents to comb through the different offerings.
Almenara said brokers should consider sustainable access to capacity for clients. “Brokers need to assess the expertise and track record of program providers. Have they launched sustainable programs in relevant niches before?” he said.
"With more programs emerging, it’s challenging for brokers to identify which ones will be successful and provide reliable, long-term coverage for their clients.”
Norman’s advice for brokers? Be cautious of “hot markets.”
“I know it can be tempting to go with the hot market, but the hot market never seems to last more than a couple of years,” he told Insurance Business.
“Agents and brokers should look to align themselves with long-standing consistent programs to bring stability to their clients and limit the volatility and upheaval caused by having to constantly find replacement coverage.”
For program managers, focusing on delivering maximum value to their clients, rather than on pricing, will help them stand out, according to Woedl.
“If you’re only price-driven, you won’t succeed,” he said. “It’s about benefit selling—providing meaningful solutions and added value to every investor. Especially in a hard market, we concentrate on finding innovative ways to support investors, retailers, and partners.”
Do you have something to say about the growth of the MGA market? Please sound off in the comments below.
