AM Best’s Keenan: Program sector’s rapid expansion set to level off

AM Best’s Andrea Keenan has warned to expect a slowdown in the rapid expansion of the program sector with a tapering of the market expected.

Speaking to The Insurer TV during last week’s Program Manager conference, Keenan said market expansion had already started to “level off” following a period of rapid growth in 2021 and 2022.

But she maintained praise for the “spirit of the sector”, which she said contains a “real specialisation of talent”.

“As capital finds more and more creative ways to access risk, the specialisation of the underwriting, capital and investments is a really interesting trend that should continue into the future,” she said.

For MGAs to thrive, Keenan said it was critical they were able to demonstrate to capital providers the value they can offer.

Following a period of rapid growth in the sector, Keenan noted that growth is often the “number one reason why a company may go insolvent”.

“But as long as the opportunities are there, the risks are being written carefully and reserves are in place, it should be fine. Growth in and of itself is not an absolute red flag; however the interests need to be aligned between those writing the risks as well as those offering the capital.

“If that's not done with eyes wide open and full understanding of the risks being taken on, then it is something that needs to be watched.”

AM Best launched its Performance Assessment methodology for delegated underwriting authority last year, and Keenan said the methodology had seen substantial interest behind the scenes.

“The challenge is that the public only sees what we publish,” she explained. “There's a lot of learning and conversations going on, where the market itself may not have seen the activity, but It's been going on in the background.

“There's been a lot of interest from insurers themselves, who have been really keen to see a little more transparency in the MGA space.

“Those companies that have released publicly the information with their assessment have come back with a lot of enthusiasm regarding the opportunities that have been opened for them.

For some smaller carriers without long established relationships, Keenan said this had “opened doors”.

“It will lead to more uptake as more companies publish their results, because of the opportunities that come from it,” she said.