Recently, there has been a noticeable rise in articles discussing the growth of MGAs in Asia. MGAs is not a new concept, but it is relatively uncommon in Asia outside the developed markets such as Hong Kong and Australia. In this article, we will aim to give you a foundational understanding of MGAs.

The MGA structure developed significantly during the 1990s and 2000s, but the role “agent” dates back to the 19th century. In some countries, MGAs are referred to as underwriting agencies and in the United Kingdom, the term MGA was once known as ‘Coverholder’, where the capacity provider was Lloyd’s. In fact, this term is still being used in Australia, which has Australasia’s largest concentration of MGAs.

What is an MGA?

According to the International Risk Management Institute, a Managing General Agent (MGA) is a specialized insurance agent that has been granted an underwriting authority by a (re)insurer to oversee programmes and negotiate contracts for an insurer.

MGAs are contracted to carry out multiple business functions—such as underwriting, binding, policy management, claims handling, and distribution—on behalf of (re)insurance companies. Unlike insurance brokers, MGAs are granted by the (re)insurer the authority to underwrite and carry out various responsibilities that would typically be managed internally by the insurer. Some MGAs operate as independent entities, while others are owned by insurers or brokers.

Why MGA?

Entering a new market often requires a substantial investment of both time and money, including navigating local regulations, hiring personnel, understanding the market dynamics, and establishing infrastructure. Delegating authority enables (re)insurers to quickly expand into new regions and specialized markets with minimal investment. Managing General Agents (MGAs) have a deep understanding of the business risks associated with the specific coverage they provide, enabling them to underwrite and price these policies more effectively than insurers venturing into the market for the first time. Insurance companies may opt for this outsourcing model to explore new products or markets, as it can be more cost-effective or practical than keeping operations in-house.

The specific nature, extent, and conditions of the services the MGA offers on behalf of the insurer are detailed in a contract known as a Delegated Authority or MGA Agreement.

What do MGAs do?

The scope of MGA's activities, both in terms of variety and complexity, is influenced by the level of delegated authority provided by the (re)insurer. Additionally, the (re)insurer may identify specific types of business or categories of insurance products. MGAs can enter into agreements to operate on behalf of either insurers or reinsurers.

The responsibilities undertaken by the MGA can encompass a variety of tasks, including but not restricted to:

- Soliciting new business – marketing insurance products to clients, agents, and brokers, and appointing retail agents.

- Underwriting risk – evaluating, rating, and either accepting or declining risks based on predefined criteria, as well as determining insurance policy pricing.

- Binding coverage – officially committing the (re)insurer to a new insurance policy and issuing the corresponding policies.

- Policy administration – handling billing and collection of insurance premiums, as well as processing, servicing, and renewing policies.

- Claims management – investigating claims, managing the claims process, settling claims, and assisting with loss prevention measures.

To sum-up, MGAs are intermediaries, acting as distributors and outsourced service providers for both insurers and reinsurers. They provide underwriting expertise, insurance cover, and related services to insurers on behalf of reinsurers; and to insurance buyers on behalf of (re) insurers via (re) insurance brokers such as IIB or retail agents.