European MGA Summit: Hybrid fronting leaders set sights on regional opportunity

By Ryan Hewlett

June 10 - (The Insurer) - Fronting carriers are now turning their attention to Europe having helped the U.S. MGA market grow its GWP to more than $110 billion, panellists told The Insurer’s European MGA Summit on Tuesday.

The panel, moderated by Howden Capital Markets and Advisory managing director of UK and Europe Leo Beckham, addressed the current opportunities and challenges within the European MGA market for fronting carriers.

Speaking at the Summit in Amsterdam on Tuesday, Bridgehaven founding chairman and former MS Transverse CEO Erik Matson said he was “very bullish” on the potential for the hybrid fronting model to expand capacity options for MGAs in Europe.

“I'm just very bullish on the EU and the role that it can and will be,” Matson said. “I believe strongly that this will be a very vibrant market sitting here two or three years from now. The numbers will be bigger. The sophistication within the marketplace will continue to increase. It’s a great place to be and It's a fantastic time to be part of it.”

Matson noted that fronting carriers have powered the rapid growth of the US MGA market in recent years, helping it to grow to circa $115 billion in GWP. He said European MGA market was primed for growth with MGAs showing increased sophistication in terms of both underwriting and data.

The executive was speaking alongside Stuart McMurdo, CEO for UK & Europe at Accredited. Both panellists noted that there is a greater level of reinsurance appetite than insurance paper available, which presents an opportunity for those offering dedicated fronting solutions.

“The opportunity is huge. It's complicated, though. It's not a simple thing for anybody to come along and grab a hold of, and that runs from data right through to the management of different relationships and regulation,” McMurdo said.

The fragment nature of the European market and the varying approach taken by domestic regulators remains a challenge, particularly around capital requirements and risk retention, McMurdo said.

“The re regulators are getting more inquisitive around the make-up of reinsurance panels. We've got to pay attention and we should have been paying attention, irrespective of that, but it's becoming something that they are focusing in on.”

This places the focus on “good quality” long-term reinsurance partners, Matson said.

Both panellists agreed that reinsurers have historically shown concerns over fronting carriers, with questions over how they are assuming risk and managing the MGAs they support.

“Our view is that we are an MGA specialty insurer, and that positioning offers two value propositions. One to the MGA is that if you partner with a company like ours, that's all we do, there's not suddenly going to be a division of Accredited writing engineering, business or motor or whatever else it might be.

For the reinsurance market, we run a relatively small balance sheet and we will take retention so that immediately goes against the fronting principle, but we offer sustainable proportional reinsurance flows to reinsurance markets with sustainable margins,” McMurdo said.

“You put all that and I think this whole European opportunity is pretty huge.”