MGAs: A Leader’s Perspective – Guillaume Bonnissent, White Oak Underwriting Agency
The MGA market continues to grow in the ever competitive and changing insurance landscape.
I have recently interviewed the CEO’s and leaders of several MGA’s to discuss their views on various topics relating to the MGA market.
Today’s interview is with: Guillaume Bonnissent, Underwriting Director at White Oak Underwriting Agency
- Guillaume joined White Oak Underwriting Agency in 2015, from Hiscox.
- He is a board director who brings his extensive experience to drive the company forward, including the introduction of new lines of business.
- Guillaume has over 18 years’ experience in the insurance industry at firms including Hiscox and Euler Hermes.
- At Hiscox he was Head of Alternative Distribution, and has held positions in Underwriting and Operations. Prior to that, Guillaume was a credit risk underwriter at Euler Hermes.
Q 1 What attracted you to the MGA market?
I perceived it to be more dynamic than the carrier market because as an underwriter, you were not limited to one particular carrier’s risk appetite or licences. Indeed I often found that the best underwriters come up with different products they want to sell to their client base but are often unable to do so because of the restrictive risk appetite or licences of the insurer that employs them. If they work for an MGA, they could actually use different carriers’ risk appetite and licences to be able to underwrite all of the products they come up with. From my personal experience of having mainly underwritten Specialty lines of business, it was what attracted me to an MGA first. The second thing that attracted to an MGA was the entrepreneurial side and the fact that again as a Specialty underwriter, you could justify more investments into your specific line of business and be remunerated for your actual underwriting performance. Whereas when you work for a typical London Market insurer, the larger team such as Property or Reinsurance will attract most of the IT budget and actuarial resources. Moreover if there’s been a big hurricane, the loss brought by those teams would wipe out the bonus pool, no matter how much profit your Specialty team has produced!
Q 2 How does working in an MGA environment differ from any other type of insurance business?
I have never worked at a broking house so I couldn’t really compare. Compared to an insurance company or a Lloyd’s syndicate, there are differences but also similarities. If you work in an MGA and only concentrate on the top line, it’s going to be a very short venture. Even though you don’t pay the claims out of your balance sheet, it’s even more important to be profitable. You don’t have your own capital to weather the storm so you need to constantly be able to produce underwriting profit so when it comes to renewal with your capacity providers, they keep on renewing and are satisfied with your results. There is definitely more pressure in that sense of performing well from an underwriting point of view while at the same time making sure that you produce enough income to be able to sustain the agency by bringing in a fee. That’s also to do with the size of the company – working in a smaller company means you have to be more dynamic, you have to constantly think of new ways of differentiating yourself from the competition. You constantly need to ask yourself why brokers and prospective clients would come to you as an MGA as opposed to an insurance company. You need to be different and you need to have a unique selling point, which you don’t necessarily have to have if you work in a larger insurance company or a syndicate.
Q 3 What does it take to grow a profitable and sustainable MGA business?
Finding the people that are good at what they do and are willing to get their hands dirty! A traditional London Market underwriter can still just about get away with waiting for brokers to come to her or him with business. That doesn’t work in an MGA model as underwriters need to be able to underwrite risks adequately, which requires great analytical skills, and have excellent business development skills to be able to get the business without relying on anyone to bring it to them. You also need to find the right carrier who understands your business model and doesn’t put too much burden on you when it comes to constant reporting, so there needs to be a lot of transparency with the capacity providers. So in summary, it’s all about having the right people, the right capacity providers and the right product, that no one else is offering or only a few are.
Q 4 What do you see as the biggest opportunity in the market?
The biggest opportunity will come from capacity providers who understand how to get the most out of MGAs and will in effect allow the best MGAs to grow and flourish. There are more and more of those capacity providers, which is great news for all good MGAs. The other great news is talk that ILS funds are looking into providing capacity to MGAs. It would obviously only work if they were providing capacity to the larger more sophisticated MGAs; the ones that are able to do most of the work from the underwriting, claims, compliance, finance etc. whilst the ILS funds would be looking for lower margins which would allow the MGA to grow and earn more out of it. Again it would only work if there was full transparency between the MGAs and the capacity providers.
Aside from capacity and looking at products, there are a lot of opportunities but it’s about finding the right niche. There are lots of opportunities for applying technology with automating a lot of the underwriting and using data science to ask less questions of your potential insured whilst enriching the data you use for the underwriting. It is strange to think that when investments in technology are becoming so important small businesses with less financial muscle could be better placed than larger businesses, such as insurance companies. There are however many reasons for that. Generally in a very large company the money is pulled towards the classes of business that will produce the largest profits and not the smaller Specialty products. Moreover, as I’ve already said, MGAs tend to be more dynamic and able to move quickly to ensure they stay ahead of the competition.
Q 5 What is the greatest challenge?
We have to work with insurers because they provide us with capacity so they are our biggest ally, but they are also our biggest threat because they could decide that they could do it themselves. The challenge is to make sure the MGA always adds value, not only to the clients and the brokers by providing something that uniquely matches the client needs or wants, but also provides something that the capacity providers perceive is better than what they could do themselves. It also goes without saying that this particular threat is minimised if MGAs don’t overcharge their capacity providers.
Q 6 What does the future hold for the MGA Market?
My personal view is that a lot of the smaller MGAs that are monoline or aren’t performing very well will fold or sell to the larger MGAs. We will be left with much larger MGAs that write multiple products. The amount of business you now need to write to be able to justify employing a compliance, finance, and a claims team means you can’t be a small MGA writing one line of business and say £10m of gross premium income.
Q 7 How has the MGA market changed in recent years?
MGAs have been around forever and people get excited by new ones but I think it’s because we have seen a lot more MGAs in the London Market than we used to. If you look at the Netherlands for instance, they have always had a surprisingly large number of successful MGAs. It’s the same story in the USA.
One of the biggest changes, is maybe that some very successful London Market insurance companies were started not that long ago as small Lloyd’s syndicates. Whereas I’m personally convinced that those successful entrepreneurs would have initially chosen the MGA route were they to start today, as it is relatively much easier nowadays than starting a Lloyd’s syndicate. Flipping the coin, if we consider the successful entrepreneurs of today to be the Insurtech founders, they’ve all gone down the MGA route, as far as I know, rather than try to start an insurance company or Lloyd’s syndicate.
Q 8 What part will technology play in the future development of MGAs?
Huge! Any MGA that isn’t looking at technology – even simple things like RPA – is going to suffer going forward. Using data science and what it can bring in artificial intelligence is key. It doesn’t mean that it will make all of the underwriting process automated. Rather it will help the underwriters by enriching the data that they get and providing them with better insight into the risk they’re underwriting. MGAs should start looking at this in the next two to three years otherwise they are going to be left behind.
Q 9 From a recruitment point of view, what is the attraction of working for an MGA?
If you’re an experienced market practitioner, the attraction is to be able to apply your entrepreneurial spirit, if you have one, without necessarily taking the risk of starting your own business. If you’re starting your career, the attraction is to be able to be a lot more flexible into which area you want to work in. Indeed, at White Oak, we expect everyone to get their “hands dirty” and work across several areas of the business. For instance, we expect our trainee underwriters to work closely with the Management Information team so that they understand how to analyse different accounts and the importance of collating good data. As an aside, that is why we tend to recruit undergraduates with a science degree.
Q 10 What advice would you give someone looking to start an MGA?
I would advise them to speak to a lot of people who have already set-up MGAs and to concentrate first on having the right product. They shouldn’t look at a product that is commoditised or already exists in the market. On the contrary, they should come up with something that’s new and able to reach a high premium income in the first five years because if they don’t, it’s not worth all the operational costs of compliance etc. Once they’ve got the right product, then it should be easier, but still an exciting challenge, to find the right people and the right capacity providers. Finally they should work on the operational infrastructure and all the necessary processes to make the collection, analysis and reporting of data as fluid and efficient as possible. In summary, it’s all about quality and scale.
Whilst it’s a very exciting time for MGAs, we keep hearing that a lot of underwriters are currently facing a rough ride, because for instance of business plans being rejected by Lloyd’s. If you are an underwriter writing a specialist line of business and a sizable book that you think you can cross sell with other products, then you should consider working for an MGA.
Right International are specialist Headhunters to the MGA/Insurance market and have extensive experience of supporting start up MGA’s, recruiting key individuals as part of the initial senior management team. We also have a successful track record of sourcing the top talent for market leading MGA’s. If you are looking to fill a key role, please contact me to discuss how RI can help.
If you would like to be involved in future articles, please let me know and I would welcome any feedback. Look out for the next interview coming soon!
All the best,
Founder & MD
Right International Insurance Headhunters
At Right International our specialty is sourcing the top achievers for the Insurance Market.