Winning the Insurance Capacity War.

In a market that is becoming increasingly competitive, certain brokers, MGAs, or coverholders are the most valuable business partners for commercial line carriers. How?

It's true, that the combined ratios of commercial lines have improved over the years. However, a large part of this is because of the increased rates of the hard markets since 2018.? It's not surprising that the hard market has a lower capacity.

To achieve this, it is now more critical than ever that intermediaries offer greater value to capacity suppliers. To deliver the business results that insurers desire, brokers, MGAs and coverholders must look at advanced and emerging technologies.

This article examines why limited capacity increases pressure on brokers, MGAs and coverholders. They are under more pressure to offer ever greater value to capacity providers. The article then examines how capacity providers face challenges in an ever-changing commercial lines market, before outlining ways intermediaries can assist in solving these challenges and beat their competitors in the battle for capacity.

Commercial Lines Insurance capacity is still scarce.

Many insurers have returned a profit in the past couple of years. Towergate says this is partly due to a reduction of risk appetite, and...

by focusing on core sectors which they know well and can underwrite profitability for the long-term.

Carriers continue to be selective in the risks that they choose to underwrite. To compete with less capacity, intermediaries need to be able to provide clear value and demonstrate that value.

Marco del Carlo is the CEO of Capacity Place and Director of the UK's Managing General Agents' Association. He says:

Securing MGA capacity, especially for new MGAs remains a difficult process, with many pitfalls." Each capacity provider has a different risk appetite when it comes to the types of business they do and the territories in which they operate.

Insurance carriers are not the only ones who can provide capacity. Many MGAs secured private equity investment and alternative capacity through reinsurers in recent years. PE investment has been driving M&A in the US, UK broking markets since 2019.

According to the most recent figures, both sources are drying up. The cost of capital is increasing, which has led to a decline in private equity investments. According to McKinsey, due to this

deal count decreased 15 percent, to just over 60,000, and deal volume fell 26 percent, to $2.4 trillion.

Gallagher Re reported:

a conspicuous lack of new capacity despite the possibility of attracting customers with tightened terms and prices.

The competition for capacity is fierce in an uncertain market, with commercial lines carriers facing several challenges.

The full extent and duration are uncertain due to the significant hardening of January 2023 renewals.

Brokers, MGAs and coverholders who are best equipped to solve these challenges will win the capacity war in 2023. Most successful intermediaries are those who embrace technology to reach their goals. There are solutions to help them better vet their clients and prospects and find submissions they can send to insurers that are aligned with their risk appetite and therefore, capacity.

I very much enjoyed getting to know better the Novidea platform over the past few months. I would urge you to talk with the team to discover how combining Salesforce's capabilities with top tech serves MGAs, Brokers and Coverholders better... Just find out here.

If you want to read the full article, click this link here.

You can also listen to my full discussion with Roi Agababa CEO of Novidea below.