MGA Market Insights: Q&A with Martin Hamrin, Chief Growth Officer at Eir Insurance
At 20Twenty, we’re committed to listening and learning from our clients.
In this Q&A, we sat down with Martin Hamrin from leading European InsurTech Eir Insurance - recently named to the prestigious InsurTech100 list of global innovators. He shared his perspective on MGA capacity, innovation, and the evolving role of MGAs in shaping the insurance landscape across Europe.
Q: Where do you see traditional insurer capacity for MGAs headed?
A: Over the past couple of years several carriers and reinsurers have pulled back capacity for MGAs. This was partially due to the market cycle – during the recent reinsurance capacity shortage, reinsurers prioritized support for their long-term relationships and insurers for in-house teams.
But the other, and perhaps more important, reason that capacity has been pulled back is that MGA business has been viewed as volatile. And if one looks across the MGA market, that’s a fair position – there has been underperformance in too many MGAs, so carriers who have overextended on MGA risk may have seen consequences. In this sense, the capacity cutbacks are a step towards a more mature market.
As capital comes back to the market in general, this should propagate into more capacity being available for MGAs but perhaps through different channels, and with more adequate requirements and oversight attached to it.
Q: Where are MGAs focusing their innovation efforts?
A: Most innovation is happening within existing lines, including product innovation. But it’s also happening within operations, finding new and more efficient ways of working.
In terms of emerging risks, MGAs are ahead within parametric and have been powerhouses in the development of the cyber line, pushing for better products and developing ways to quantify and manage cyber risk. Some key carriers also deserve credit for making cyber insurable, by taking on early-stage risk and building impressive capabilities to understand this risk and create products for it, including by supporting MGAs in the space. This type of symbiosis—between innovative MGAs and enabling carriers—is essential for tackling emerging risks.
Q: Are MGAs still ahead of carriers in customer interfaces, data analytics and product innovation?
A: For customer interfaces (or distribution innovation in general) and product innovation I would definitely say, yes, MGAs are leaders and drivers of change.
For analytics, the answer is more nuanced, and rightfully so. MGAs have contributed meaningfully within niche analytics for specific lines, e.g. in cyber. In the personal lines space, they have also contributed a lot within customer behaviour analytics. But in terms of the more general analytics – e.g. pricing of traditional lines, risk management, portfolio optimization etc – carriers are holding ground. There have been attempts on the MGA side to implement novel analytics in these domains, but quite a few have failed, not least due to lack of data.
This may change over time, but carriers have a structural edge as they have access to data from many channels.
Q: What are the weak spots in the MGA sector?
A: Based on what I’ve observed over the past few years, underwriting performance has been an issue. There are many well-run MGAs, but there have been a few too many who have had problems. That said, I don’t see this as an inherent weakness of the MGA model itself. Rather, I see a couple of other reasons behind the performance issues.
First, “MGA” has become something of a buzzword, attracting distributors who may lack the necessary underwriting expertise but push to establish MGAs regardless. It is certainly possible to incubate a successful MGA out of, say, a broker—provided the right skills and capabilities are developed. But that hasn’t always been done.
Second, MGA oversight is a dedicated and complex discipline, and not everyone has gotten that right. Again, the popularity of the MGA model has led some carriers to enter this space without first building the necessary oversight capabilities—perhaps assuming that managing a portfolio of MGAs is similar to managing in-house underwriting teams. It’s not.
As for more structural challenges, I’d point to capacity stability. The MGA model seeks to decouple distribution and underwriting from licensing and capital—providing MGAs with more independence from the carrier. But the flipside is that the carrier also gains more freedom and can withdraw capacity unilaterally, including for reasons unrelated to performance.
Martin Hamrin
Q: From MGAs’ perspective, who has the edge: traditional insurers providing them with capacity or fronting carriers used by reinsurers?
A: The perfect carrier for an MGA sits somewhere in between. Traditional carriers pose some challenges – MGA will have to navigate carefully around competition with their core business, internal red tape and operational models designed for in-house underwriting. They will also always be secondary to the carriers’ own business if capacity becomes scarce. On the other hand, the pure fronting model has sustainability issues. Fronters play the regulatory role of the insurer, but they don’t always own the risk in the way regulators and others expect them to do. I suspect that regulatory push-back against pure fronting will accelerate, at least on the European side; on the US side attitudes may remain a bit more lenient.
So an ideal carrier for an MGA is one that is dedicated to supporting external distributors, but with a real balance sheet on which it can retain enough risk to have skin in the game, and with robust knowledge and capabilities across underwriting, risk, compliance and claims.
Q: How big is the issue of MGA “mission creep”?
A: If we go back enough years the mere existence of MGAs was considered a mission creep out of pure distribution That view didn’t hold up - MGAs have since proven to be powerful and successful platforms for innovation and for efficiency.
The current conversation is not materially different. There will be defensive attitudes from some carriers as MGAs expand their role. But the right question to ask isn’t, “Is this their role?” but rather, “Are they doing it well?” And carriers who approach it this way will have an advantage in the MGA market.
That said, as MGAs take on broader responsibilities they should expect expanded oversight from the carrier. If the MGA pushes into, for example, portfolio management-type responsibilities, this is a domain where the carrier must retain ultimate ownership.
There is also an efficiency perspective to this. Even though MGAs have contributed significantly to improving efficiency in the insurance value chain, some tasks arguably reside better with the carrier. This applies to more generic tasks that are replicable across MGAs, and there are plenty of examples of this within, for e.g. compliance and risk management.
Q: Similarly to the above, how much of a problem is channel conflict, with capacity providers’ own business and/or between their rival MGAs?
A: The conflict with the carrier’s own business is definitely an issue for MGAs who work with traditional carriers. Even if there isn’t a conflict right now, an external MGA will in most cases be the first one out if there is capacity shortage or another form of conflict with an internal team.
As for competition between MGAs, I see this as a fundamental part of effective MGA portfolio management. Supporting several MGAs who target exactly the same segment is never a good idea. That said, the problem is smaller than it appears. MGAs have a strong incentive to differentiate themselves, and with careful structuring, it’s often possible to support multiple partners without creating meaningful channel conflict.
Q: How can trust between MGAs and carriers be maintained?
A: I expect MGAs to have a clear plan and then execute on it. Obviously, deviations can and will happen. But as soon as the MGA even suspects that things may shift, that should be communicated immediately. From a carrier’s perspective, trust breaks down when there are surprises or lack of transparency.
Q: Has private equity investment into MGAs peaked?
A: I don’t think so. While there has certainly been a slowdown in the flow of new capital—particularly from venture capital, but also from private equity—this seems to stem from two main concerns: disappointment with the growth and performance of some backed MGAs, and uncertainty around their ability to secure stable capacity.
But I doubt the pullback is permanent. There are strong structural arguments for why the MGA model is here to stay and why it has the potential to capture a much larger share of the market. In the future, capital will be tied to deeper assessment and due diligence, with a sharper focus on performance and far less appetite for speculative growth stories.
Q: Is there still enough business to go round?
A: Probably not, unless the industry finds ways to increase insurance uptake. There are certainly MGAs who try to do this, and they have succeeded in some domains. Embedded insurance is an example of this, as are some of the parametric products. But neither carriers nor MGAs have managed to make a significant dent in the general protection gap, such as underinsurance against natural perils, or protecting underserved groups, and this is where the real money is. We need to continue to think about this.
