Chris Butcher explains why the theme for this year’s MGAA conference is particularly apt in the current market.

This month’s MGAA conference theme is “The Challenge is Now” and for many in the market, time and growth are challenges that have to be addressed and simply cannot afford to be postponed.

As the world emerges from the pandemic, we are already seeing a sizeable increase in the desire to create new MGA and broking entities. The capacity providers are keen to examine how they can utilise their dormant capital, while for many the COVID restrictions have provided the opportunity to consider how they wish their future careers to develop.

The London market remains an attractive place to operate, and we are discussing new starts not only with those in the market but also those internationally who are keen to look to new ventures. The third and fourth quarters of the year traditionally see an uptick in interest. There is always an expectation that things will move quickly and that operations will be ready for 1/1, which is all to often not a realistic timetable. Indeed, it comes back to the reasons why I believe for those looking to start an MGA the challenge will always be now.

The Financial Conduct Authority (FCA) will say that the authorisation process will take between three to four months. Our experience is that the reality is closer to 12 months. It can be a significant issue for those who have the financial support in place, have the market identified and now face months where they are unable to trade and are also burning through the initial capital they have been able to obtain, with no opportunity to trade.

Waiting for 12 months is not acceptable and therefore what we have found is that many of the firms we are working with to incubate will consider the option of setting up as an authorised representative (AR). Another advantage for broker start ups is the possibility of accessing the range of insurance TOBAs that our business have in place. The ability to operate now is vital for so many who have the backing and need to drive revenue to meet the expectations of their investors.

There are those who have opted to take the AR route to operate while they undertake the regulatory approval process, given that our AR support only commits them for a minimum of 12 months. What we have increasingly found is that many will remain with us as an AR for a much longer period as they establish the business and can build on the back office support that we can provide. The need for professional services support, such as company secretariat, claims services, legal services and wider back office support are becoming increasingly important in a market were regulatory demands are only increasing.

For those MGAs which are already operating but are now looking to maximise the opportunities the current market conditions provide the current challenge is the ability to grow the back office at the same rate as the underwriting operations, given that additional business demands greater administration and the ability to quickly scale up claims capability.

The MGAA is a case in point where we are seeing teams from their membership feeling that after time with a successful MGA, they have the capability to create their own business, which is indicative of the positive outlook for the market. The outlook is positive but immediate challenges remain for those which want to make the move, a challenge which our insurance services team can support you in meeting.

For more information please contact Chris Butcher, CEO of Intermediary Services on Chris.Butcher@davies-group.com