Like brokers and insurers, coverholders and Managing General Agents (MGAs) are an example of one of the great symbiotic relationships within the insurance industry. The MGA/coverholder model emerged in response to a need for specialised expertise in underwriting and distribution, while carriers continued to provide underwriting capacity and risk capital. This wholesale distribution structure has since proliferated across the world, filling key roles in the insurance wholesale distribution chain. 


MGAs and coverholders serving European SMEs 

The focus of the MGAs and coverholders has diversified across lines of business and industry sectors, while simultaneously they are offering more specialised solutions and developing deep underwriting expertise. LSM has created an expanding network of affiliated MGAs and coverholders across the world, covering niche markets that are often characteristic to their area of operation. 

The European market is a particularly interesting case study for the relationship between MGAs and carriers as the tailored insurance solutions offered by MGAs or coverholders have proved particularly beneficial for small and medium- sized businesses (SMEs) across Europe. The European Commission estimates “SMEs represent 99% of all businesses in the EU, employ around 100 million people, account for more than half of Europe’s GDP. [1] These growing businesses are exposed to a range of unique, diverse and often difficult to place risks.

The dominance of these types of businesses within the European economy has opened the door for MGAs and coverholders to cover a variety of SMEs. This has expanded our business capability beyond capital cities and concentrated insurance hubs into the regions. Agents covering small areas offer a unique advantage with their ability to provide comprehensive end-to-end service to clients within their localised regions. This personalised approach fosters stronger client relationships and a deeper understanding of local market dynamics and customer needs. 

Consequently, the spectrum of businesses we engage with has become remarkably diverse, ranging from small art galleries in the regions of Spain to legal professionals offering their services in the bustling cities of France.

Working with MGAs and coverholders provides us with the direct access advantage to their well established distribution channels, such as the relationships with their retail brokers or direct access to clients. This provides carriers with additional avenues to reach SME customers without having to invest heavily in building out their own distribution networks. The ability to outsource underwriting, policy administration, and claims handling to the MGA or coverholder is also a cost effective option for large carriers, without sacrificing high quality services to clients. 


Digital trends in the MGA and coverholder segment

Advancements in technology have significantly added to the MGA and coverholder model, enabling greater efficiency in underwriting, policy administration, and distribution. Technology has brought on the reinvention of MGAs and coverholders and in many ways, allows them to constantly reinvent themselves as they work in parallel with technological advancements. 

MGAs and coverholders are able to react to market conditions in a more dynamic and agile way than their larger counterparts and apply new technology to their operational models in a short period of time. 

Many MGAs and coverholders now leverage digital platforms, data analytics, and automation to streamline operations and enhance customer service. These digitalised platforms have proven powerful, particularly within the SME space following the peak of the COVID-19 pandemic. 

It is likely that MGAs and coverholders will look to find ways to enhance their collaboration with carriers to streamline operations and improve efficiency further. However, the insurance market has sometimes been slower to embrace digitalisation, which creates hurdles for the seamless integration with some of the more innovative MGAs and coverholders. 

Despite this challenge, the insurance market is rapidly evolving and making strides to become more digitised, allowing opportunities for enhanced customer experiences because of digitalisation and data driven decision making. As technology continues to advance, MGAs, coverholders and carriers will need to adapt and innovate to capitalise on these opportunities and drive sustainable growth in the industry.

The MGA and coverholders model has spread, grown, and matured. The advantage of localised knowledge and end-to-end offerings they provide are invaluable to carriers, particularly those looking to operate with the expansive SME market in Europe. Insurance is a collaborative endeavour and the carrier-MGA/ coverholders relationship is now one of the great avatars of industry collaboration. 



[1] European Commission: Unleashing the power of European SMEs