Howden Tiger and Conning release research on the rise of asset-light insurance structures
- MGAs are growing rapidly in prominence. Premiums underwritten by non-insurer affiliated US MGAs have more than doubled since 2018, rising to $33 billion in 2022.
- Fronting companies wrote more than $13 billion in total premium in 2022, more than double the business written in 2021.
Monte Carlo, 10 September 2023 – Howden Tiger, the fastest growing tier one reinsurance broker, and the insurance research group at Conning, a global investment management firm serving the insurance industry, announces today the publication of their comprehensive report, Travelling Light. The report details the rise and impact of asset-light insurance structures, their prominence in the United States and their growing importance globally. It outlines the critical role they play in ensuring the insurance market remains relevant and responsive, at a time of heightened underwriting and investment volatility.
Smart and nimble
A distinguishing feature of asset-light structures such as managing general agents (MGAs), fronting companies and reciprocal exchanges is their ability to write insurance business through mechanisms that provide greater capital flexibility and optionality. These structures have a growing role in insurance product development and distribution, acting in close partnership with more traditional balance-sheet insurers and reinsurers. This ‘asset-light’ approach fosters greater responsiveness to market fluctuations, bolstered by cutting-edge data analytics.
William Pitt, Director, Insurance Research, Conning, says: “Asset-light entities are delivering for brokers and insureds, developing new products for some of the most challenging exposures in today’s market, including cyber risks and property perils impacted by climate change. At a time when data analytics are increasingly pivotal, these agile entities can often move faster than traditional carriers, identifying and developing attractive niche markets and offering speedier submission turnarounds”.
There has been a striking evolution in the insurance market over the past decade, with talented underwriters increasingly choosing to join, or form, MGAs, attracted by their entrepreneurial approach. Asset-light structures, with their modern, data-driven approach, have also been a magnet for talent from outside the insurance industry, particularly in areas requiring cutting-edge technology and data science skills.
A balance between risk and agility
While asset-light structures have become more prevalent, the assumption of risk – particularly where catastrophe-exposed – requires a strong balance sheet. Traditional insurers will maintain their importance, and there are other ‘asset-lighter’ structures such as consortia and hybrid fronts, on a sliding scale of capital intensity.
David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Tiger, says: “The numbers are revealing; premiums underwritten by non-affiliated US MGAs have more than doubled since 2018, rising to $33 billion in 2022. It is evident that asset-light structures are forging a new frontier, creating new approaches for the industry.”
Elliot Richardson, Vice Chairman, Howden Tiger, adds: “In order to remain relevant, the industry must find better ways of deploying capital in reinsurance and much innovation can happen in the MGA space, with dedicated investment, and advanced strategic and analytical solutions. As the only full-stack reinsurance broker, Howden Tiger is at the forefront of the asset-light evolution, placing a combined $7.5 billion of gross written premium on behalf of clients in 2023 and helping them adapt to these new structures.”