TMPAA panel: No letup in MGA M&A amid strong continued investor interest

By Chris Munro

May 6 - (The Insurer) - There will not be a drop-off in the number of MGAs operating in the market even as M&A continues at pace within the sector, with interest in the industry from investors including private equity to remain amid current economic uncertainty.

Those were just some of the points raised during a panel discussion during the Target Markets Program Administrators Association’s mid-year meeting in Dallas, Texas on Tuesday.

Doxa CEO Matt Sackett noted there have been suggestions that the volume of MGAs operating within the market, which some industry commentators have pegged at around 1,000 in the U.S., will fall off given the significant M&A that is taking place within the sector.

“I’m not seeing that now,” he said.

“I’m just seeing the vast expansion of MGAs and the problems that we’re solving within the insurance industry, with more people creating businesses to solve problems that are being created by social inflation and climate change and everything else taking place out there, I don’t see that falling off,” Sackett explained.

“I never want to say that nothing will ever change, that it’s going to stay the same forever... But in the next few years, I think it’s going to be relatively stable,” he added.

There is also little expectation that the types of companies that are undertaking the majority of the M&A within the programs and MGA space will change, although as Euclid Program Managers president and CEO John Colis highlighted, that dynamic has shifted slightly in recent years.

“You get to a certain size now in the market that we’re in where there aren’t that many buyers compared to what that looked like a few years ago. But for that middle tier, or even the smaller, high-quality MGA, there’s a lot more buyers out there,” said Colis.

Arden Insurance Services founder and CEO Brian Cohen noted there are now three private equity firms that have set up platforms whose sole goal is to “just go out and buy MGAs”.

“That sent a message to me,” he said.

“If there’s three separate PE firms and three separate investment committees that all came to the same conclusion – that we need to be investing in (the MGA) industry, then that’s a good message for the long-term,” Cohen added.

Starfish Specialty Insurance’s founder and CEO Jeremy Hitzig said that with the recently imposed U.S. tariffs “roiling the markets”, he had been asked what the impact was for him.

“I don’t want to simplify it, but it’s not that much,” he said.

“It’s just a reminder of why investors like this space. So if you think the multiples will come down or there’ll be less interest, there’s another case where it would seem like there’s more interest in what we do,” Hitzig added.