Insurers Working with Managing General Agents: When Should It Make Strategic Sense to work with MGA's?

Why the Decision Has Become Strategic

In many insurance markets, managing general agents (MGAs) are increasing their share of new business faster than traditional carriers. This trend is most visible in broker-led and specialist markets such as the UK, the US, Benelux, the Netherlands, Italy, and parts of Continental Europe, but it is no longer confined to classic specialty lines. MGAs are also gaining traction in selected retail, embedded and cross-border use cases.

In this context, an MGA is a delegated underwriting entity that designs products and manages underwriting and distribution to varying degrees, while insurers provide balance sheet capacity, regulatory cover and oversight.

The growth of MGAs is not a short-term distribution anomaly, nor can it be explained solely by technology or marketing innovation. It reflects structural changes in how insurance products are designed, distributed and operated. As insurance value chains fragment, underwriting, distribution, servicing, and technology are increasingly decoupled. MGAs sit at the intersection of these functions and specialise in reassembling them for specific risks, customer segments or channels.

For insurers, this creates a strategic inflection point. Historically, many carriers either did not work with MGAs at all or treated delegated authority as a niche tool limited to specialist markets. Today, insurers broadly fall into three groups: those that still avoid MGAs altogether, those that work selectively with MGAs alongside a core proprietary business, and a smaller number that have specialised almost entirely in providing capacity through structured MGA partnerships.

Importantly, non-adoption does not necessarily reflect a lack of sophistication. In many cases, it reflects internal prioritisation, governance complexity and limited organisational change capacity. Well-run carriers with strong core portfolios often struggle to justify diverting scarce resources to smaller, non-core opportunities, even when those opportunities are profitable in isolation.

As MGA market share continues to grow, the strategic question for insurers is therefore no longer whether MGAs are relevant. It is whether to engage deliberately with MGAs, and if so, under what conditions, rather than being pulled into ad-hoc arrangements once competitors or distribution partners have already shaped the economics.

Why Opportunity Cost Determines Whether Insurers Should Work With MGAs

Most insurers could, in principle, build many of the products that MGAs bring to market. The limiting factor is rarely a lack of underwriting knowledge in isolation. It is the cumulative opportunity cost imposed by the carrier operating model.

Launching and scaling a new insurance product inside a carrier requires coordinated effort across pricing, actuarial, legal, compliance, reinsurance, IT, operations and distribution. Each function has its own governance gates, review cycles and competing priorities. In practice, these resources are already absorbed by maintaining core portfolios, delivering regulatory change, modernising legacy systems and protecting existing profit pools.

As a result, niche opportunities, even those with attractive standalone economics, often fail to clear internal prioritisation thresholds. Products below a certain scale struggle to justify the fixed cost and organisational disruption required to bring them to market. The issue is not that they are unprofitable, but that they are insufficiently strategic relative to other demands on the organisation.

This is the gap in which MGAs operate. They specialise where the addressable premium volume is meaningful but not strategic at group level, where focused underwriting expertise matters more than organisational breadth, where distribution access is specialised or embedded, and where speed to market outweighs perfect internal alignment.

MGAs absorb a significant portion of the execution risk associated with launching new products. They operate outside the insurer’s internal queues, governance bottlenecks and IT release cycles. For insurers, this can materially change the economics of experimentation.

Experience shows that internal product launches often take many months and require substantial direct and indirect investment across multiple functions, with a high probability that initiatives are delayed, scaled back or abandoned. By contrast, working with an MGA typically involves lower upfront investment focused on governance, oversight and integration, and allows products to reach the market more quickly. Even allowing for failure rates, the expected cost per successful launch is often lower.

The strategic question for insurers is therefore not “could we do this ourselves?”, which is usually true, but rather “what would we have to stop doing, delay or deprioritise in order to do this properly?” For many carriers, MGAs represent a way to participate in upside while capping downside and preserving focus on core priorities.

The Different MGA Models Insurers Partner With

One of the most common strategic errors insurers make is treating “the MGA model” as a single, homogeneous category. In reality, MGAs operate in materially different segments, each with distinct economics, risk profiles and governance implications.

Specialist underwriting MGAs

These MGAs are typically rooted in long-established specialist markets such as marine, transport, specialty liability, art, classic cars or complex commercial risks. They are underwriting-led organisations, often built around individuals or teams with deep domain experience and strong broker relationships.

In these models, underwriting performance is the franchise. Reputation risk is high, peer scrutiny is constant, and poor performance quickly limits access to capacity. Incentives between MGA and insurer are often naturally aligned, because long-term survival depends on technical results rather than short-term growth.

Distribution-driven MGAs

Other MGAs are built primarily around access to a specific distribution channel, such as affinity groups, embedded partners, broker pools or price comparison platforms. Their competitive advantage lies less in underwriting originality and more in orchestration, speed and cost efficiency.

In these cases, underwriting risk can be obscured by early growth. Portfolios may look attractive initially, particularly while volumes expand, but can deteriorate once growth slows and latent risk factors emerge. Insurers frequently underestimate how much discipline is required to keep these models profitable over time.

Technology-orchestrated MGAs

A third segment focuses on high-frequency, multi-country or data-driven products such as travel, device protection or usage-based insurance. Their value lies in integrating external data sources, service partners and operational workflows that many insurers struggle to support within existing systems.

Here, the primary advantage is not scale in the traditional sense, but execution speed and operational flexibility. The underwriting risk may be relatively straightforward, while the operational and data risks are not.

Treating these segments identically in governance, economics or risk appetite, is a category error. Many MGA failures stem not from delegation itself, but from applying the wrong oversight model to the wrong type of MGA.

When MGAs Create Real Value for Insurers

MGAs do not create value in all circumstances. They tend to add real value for insurers only under specific structural conditions.

One such condition is specialised underwriting expertise that is difficult to build, retain or scale internally. In specialist commercial lines and niche risks, MGAs are often built around small teams with deep domain knowledge and strong broker relationships. For insurers, accessing this expertise through delegated authority can be more efficient than attempting to recreate it within a larger organisation.

A second source of value is access to distribution channels that insurers do not control and are unlikely to replicate economically. This includes broker networks, affinity groups and embedded partners that require tailored propositions, rapid iteration and close operational integration. MGAs are often closer to these channels and detect emerging opportunities earlier than carriers operating through annual planning cycles.

MGAs also create value by aggregating sub-scale opportunities. Many niche products sit below the size at which an internal build makes sense, yet can be structurally profitable if operated with a lean setup and focused governance. MGAs allow insurers to participate in these niches without mobilising full internal teams for each opportunity.

Finally, MGAs can create optionality. Because they are closer to distribution and customer feedback loops, MGAs often surface opportunities that insurers would not have identified or prioritised in advance. Working with MGAs allows insurers to test and learn in these areas with limited sunk cost and faster cycle times.

In these cases, MGAs do not replace the insurer’s core underwriting franchise. They complement it by extending reach into areas that would otherwise remain inaccessible or uneconomic.

Common Mistakes Insurers Make When Working With MGAs

Despite these advantages, there are clear and recurring failure patterns in MGA partnerships.

Insurers often enter MGA relationships opportunistically, without a portfolio view or a clear understanding of how the opportunity fits their operating model. They may back teams with compelling distribution access but insufficient technical depth, or mistake marketing sophistication for underwriting expertise.

Another common error is assuming that MGA losses are “contained” because operations are outsourced. In reality, delegated authority often delays feedback loops. Portfolios can appear profitable for extended periods before hidden risk factors, such as age mix, tail exposure or claims inflation, surface. When problems become visible, they tend to be large and difficult to unwind.

Insurers also frequently overestimate the transferability of success. Many MGA models work precisely because they are narrow. Expanding them into adjacent products, markets or customer segments without recognising how specific the original advantage was often destroys the economics.

MGAs do not remove insurance risk. They reallocate where execution risk sits. If incentives, governance and expertise are misaligned, losses often surface later and can do so at greater scale.

When Should an Insurer Work With an MGA?

Based on observed patterns, insurers are most likely to benefit from working with MGAs when:

• The opportunity is profitable but sub-scale relative to internal priorities

• Specialist underwriting expertise or distribution access is difficult to replicate internally

• Speed to market materially affects economics or competitiveness

• Execution risk can be meaningfully transferred while underwriting discipline and oversight remain intact

• The MGA fits within a clearly defined portfolio strategy rather than a one-off transaction

  
  

Absent these conditions, MGA partnerships are more likely to create complexity than value.

A Strategic, Not Tactical, Decision

Working with MGAs should be a deliberate strategic choice, not a series of isolated transactions.

Insurers that succeed with MGAs tend to define clearly which MGA segments they want exposure to, accept that not every opportunity fits their operating model, and build internal capability to assess, onboard and monitor MGA partnerships repeatedly. Crucially, they treat MGA engagement as a portfolio activity rather than a one-off bet.

The MGA market will continue to grow, with or without any given insurer. The strategic question is whether insurers engage intentionally, using MGAs to extend reach and optionality while retaining discipline, or only reactively, once competitors have already shaped the economics.

Handled deliberately, MGAs can act as a force multiplier. Handled casually, they tend to become a deferred problem.