What start-up MGAs need to find capacity partners

Are you starting up your own managing general agent (MGA) in Canada and looking for a capacity provider?

Bring a robust data set to the negotiating table, P&C industry capacity providers told an audience attending the Canadian Association of Managing General Agents (CAMGA) annual general meeting in Toronto in May.

And be prepared to stick around during soft and hard market cycles, when pricing fluctuates between high and low premium rates.

Currently, CAMGA has more than 80 MGAs listed as members of its association. MGAs continue to proliferate “like new weeds” across the Canadian landscape, panel moderator and CAMGA board chair Pete Tessier quipped.

With that in mind, Tessier asked panellists: “If you’re a startup [MGA], and you’ve got a business plan, how do you bring data to that at the early stage [of finding a willing capacity provider], versus the needs of data when you’re a more mature entity?”

“From an insurer standpoint,” replied Jeff Robinson, vice president of programs at Arch Insurance Canada, “if we’re adding an MGA, we want that data to understand what we’re getting into, not only now, but what’s a couple years down the road in the softening market look like? And are we going to be comfortable with that?”

Tessier followed up with Robinson and asked if there was a “table stakes” of data MGA startups should bring to the table when trying to find capacity providers.

“Obviously, you need to know what your volume losses are, multi-year out, [and] the segmentation within that,” Robinson said. “What class of business are you writing in your book of business? Is this something that you’re going to still do moving forward?

“So, those are the table stakes. And if you can add more data, it just helps you get more granular, understand geographical areas where you want to grow, and really gives the insurer a level of comfort level that this is a good MGA you want to loan your capacity to, or if they should be concerned.”

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With a good dataset, the MGA will be more in tune with the underwriters of the capacity providers, which will help to develop trust in the relationship going forward, said Alastair Connor, senior vice president at Gallagher Re.

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“We really do try to only…partner with companies [MGAs] that have sufficient data to allow us to…get the analytical arms around [the risk],” he said. “Because we want to be able to technically defend the margin in the business.

“We think we know what kind of margin a hard market commands, from a reinsurer perspective and a carrier perspective, and similarly, you know, we see that shrink that margin…in a softer market cycle.”

Connor said he’s been warning over the past 18 months of a soft commercial market. “Let’s not memories get too short.”

He cited a hard commercial market in 2019 and throughout COVID in 2020-23. At that time, syndicates of Lloyd’s withdrew from Canada, shrinking capacity available to MGAs in Canada during the hard market (characterized by higher pricing and strict terms and conditions.) Lloyd’s was Canada’s fourth-largest capacity provider by total insurance revenue in 2024, according to Canadian Underwriter‘s Stats Guide, which uses data supplied by MSA Research.

“A lot of Lloyd’s capacity left the Canadian market [during the hard market], and things were not easy for MGAs,” says Connor. “And we’re now in a spot where things are a lot easier for MGAs.

“So, those that were there for you in those tough times, obviously we all have businesses to run, we need to take advantage of the market cycle. But do it with some of that legacy partnership that got you through the hard market in mind.”

Alan Falukozi, programs lead at Fortress Insurance, said start-ups will also have to go beyond just data when they search for partner capacity providers.

“When you are looking at something new, when you’re carving out a niche, when you’re trying to develop something that isn’t readily available in the market, we need to look at it almost like, as I call it, a ‘venture capital model,’” he said. “We are underwriting not to the underlying data or product that might not yet fully exist or be fully developed.

“So we need to believe in you, your strategy, your underlying knowledge, as well as your distribution strategy. Because if all of those things are aligned, then you know there’s enough technical expertise in this room that we can figure out a way to rate it and distribute it properly.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.