“Advice should extend to areas such as credit control, distribution and marketing. We should provide all of this only in anticipation of the facultative risks that will come out of an enduring and mutually beneficial relationship.”
We need to lend our experience, too. If the insurer would like to enter non-standard motor more fully, MGAs should be able to share knowledge based on experience (especially covering the pitfalls of the class) to augment their limited understanding and help them to succeed. Advice should extend to areas such as credit control, distribution and marketing. We should provide all of this only in anticipation of the facultative risks that will come out of an enduring and mutually beneficial relationship.
Mid-sized and eager
To excel, we must develop and deliver a similar set of services for the many larger and/or more successful Middle East insurers seeking growth. Many rely either on geographical prominence or on business from their commercial group. However, these advantages shield these insurers from normal market competition, which may make growth a dangerous path.
For example, a successful Saudi insurer may have two or three relatively large and profitable portfolios, and see demand from its closely-held clients to cover energy risks, but have neither the underwriters nor the track record to enter the class.
That local insurer would need external skills to squeeze more out of its existing group relationships. Another may need knowledge in bancassurance, cross-selling, or casualty trends. MGAs that can deliver insights and training in these and similar areas will help growing insurers maximise the potential of their existing clients while creating an enduring, perhaps unbreachable reinsurance relationship.
To do so, the MGA should be prepared to provide the risk data and the credibility necessary to get the insurer over the line with treaty reinsurers. Alongside technological tools and analytics, they should help with product development and differentiation, outline key performance indicators, marketing and distribution strategies, and sales training and support, and even advise on customer retention techniques.
In short, to become invaluable MGAs must act like reinsurers. We must provide a direct line to capital, reduce frictional costs, and plan to share directly in each cedant’s long-term success.
Large and hungry
The largest insurers in the Middle East are well resourced, and need far fewer external services. However, they almost certainly require external expertise – if only for a second view – and meaningful, highly rated capacity in their chosen lines of business. Both needs are greater with very large or highly complex risks.
Because of this, a significant number of these attractive risks are taken by local, regional, and especially multinational brokers straight form their point of origin in the Middle East to be underwritten in London’s facultative market. Such risks tend to return to local competitors only when London’s pricing or terms become constrained.
“MGAs must provide broad and deep expertise in all the region’s major risks and risk classes… to move business that has left the local market back into the region, where it belongs”
To break this cycle, local MGAs must provide broad and deep expertise in all the region’s major risks and risk classes. Such a strategy will ultimately help to move business that has left the local market back into the region, where it belongs.
It is perhaps a tall order, but the results will be tangible and significant. If we, the growing community of MGAs in the region, set out to give local insurers more than just capacity by delivering the varied, valuable services and insights they require to grow, succeed, and meet their diverse business goals, we will create a sustainable, profitable, reliable, and vibrant reinsurance market right here at home, where the risks live – and we will secure our places within it.
This article was first published in the February 2022 issue of the Middle East Insurance Review magazine and has been re-produced here with their kind permission.