Incubators help MGAs take their first steps

According to government owned British Business Bank, business incubators provide startups and early stage organisations with support and resources that they might find difficult to access elsewhere.

This includes “access to networks, investors and mentors, or coworking space alongside other businesses and experienced professionals”, the economic development bank explained.

Although insurtech incubation models, such as Lloyd’s Lab, have been on the sector’s radar for a while, MGA incubators are now also coming to the fore as industry-wide appetite for this type of underwriting business grows.

Julia Coakley, chief operating officer at the Managing General Agents’ Association (MGAA), told Insurance Times: “It’s a very exciting time for entrepreneurs seeking to use underwriting expertise and the volume of enquiries we get from those starting an MGA has increased considerably over the last 18 months.

“Many MGAs are started by underwriters, [who are] experts in assessing risks but they may not have other components in place [that] they need [in order] to trade.

“Incubator firms can provide a broad range of services to help fill the gaps.”

What do incubators offer?

Although incubators can help established MGAs, most of their activity involves startups because setting up shop can be both complex and costly.

Many fledgling MGAs trying to go it alone often run out of money before even starting to write business, so the ability of incubator firms to provide risk capital or facilitate it through other parties is one of their main attractions.

Another advantage is the help they can provide with regulation – for a startup to hire lawyers directly is unlikely to be cost effective.

Chris Butcher, executive chairman of intermediary and market services at Davies Insurance Services, said: “An incubator is able to lend its regulatory permissions to its members, like with a broker appointed representative (AR).

“This regulatory framework has really helped the UK with insurance distribution, as overseas countries don’t have the same model.

“Indeed, around half of Davies’ MGAs are from overseas and are wanting entry into the UK.”

An incubator can typically reduce the regulatory approval process from 12 months to three months, thereby saving nine months of working capital, and can provide ongoing compliance and governance support.

Kate Albert, chief executive at Kova Professions – a professional indemnity specialist MGA that was incubated by Mission Underwriters – said: “Mission Underwriters handled bordereau and processing and basically removed the red tape for us, enabling the Kova team to focus on doing the day job of underwriting.”

Help with accounting and risk management are other important areas that incubators assist with.

Aurora, a digital MGA founded in 2021, cited this as a key benefit during its incubation period with Pro MGA Solutions.

Lauren Stables, head of digital trading at Aurora, explained: “Access to risk management and compliance tools helped us establish a robust compliance and risk management framework, ensuring that we manage and monitor risks robustly and adapt to evolving market conditions as we grow.”

In addition, incubators can provide most of the services a company requires, ranging from digital trading platforms and assistance with acquisitions and new business opportunities, to support with claims management, human resources and information technology. A minority can also help with marketing.

But most incubators have gaps in their ranges, so it’s crucial for those setting up MGAs to first establish what support they need and then to seek out the incubator model that most closely matches their requirements.

With the possible exception of large insurers that start their own MGAs, the key question is rarely going to be whether or not to use an incubator, but which one to use?

How do they differ?

The length of involvement incubators have with MGAs can vary and most players cite particular selling points regarding the scope of the services they offer.

For example, Pro MGA Solutions – which currently receives enquiries from 10 to 15 new MGAs a month – prides itself on providing an unusually global approach to trading, as opposed to just being focused on the London market.

It cited the US as a big growth area and also signposted significant expansion in the Middle East and Latin America.

Davies Insurance Services, meanwhile, offers the ability for MGAs to move into the Lloyd’s environment and perhaps eventually become syndicates.

It is also unusual in being able to help big corporates set up their own MGAs. As well as insurers, the firm has helped banks and utility companies that sell their own insurance products.

Mission Underwriters is notable for its broad range of services – it believes that it adopts a highly collaborative approach, which includes mentorship, access to established networks, full brand development and targeted marketing support.

OneAdvent, another that can help with marketing, also extends into public relations (PR). Criterion Underwriting, which has been incubating with OneAdvent since October 2023, has particularly benefited from this support.

Stuart Kinsella, underwriting director at Criterion Underwriting, explained: “[OneAdvent] is especially well connected and has got us plenty of relevant press coverage.

“PR is very important for a business like us that writes waste property, which has traditionally had negative connotations in terms of loss history in the market.

“Criterion underwrites this class in the UK, Australia and New Zealand and the publicity achieved has given us a wider distribution.”

The future

As the trend towards MGAs springing up to offer flexible and nimble services continues to gather pace, it is hard to see incubators doing anything other than increasing in importance.

Adrian Morgan, chief executive at Mission Underwriters, UK and Europe, said: “Should we continue to enjoy a hard market, incubators will continue the competition for top underwriting talent, which drives us to refine our offering to attract the best people and ensure we support them. But in a softer market, the competition might be lessened.”

As individual incubators become increasingly scrutinised on what they can and can’t deliver, they will naturally try to up their game. It will be interesting to see what this evolution involves as this model moves forward.