MGAs, capacity and control

Bermuda has recently seen a trend in the formation and establishment of managing general agents (MGAs) or “insurance agents” as defined in the Insurance Act 1978. Historically, MGAs were used as simple distribution channels for insurance products. They have since evolved into sophisticated underwriting businesses housing specialist experience with access to the balance sheet capacity of re/insurers.

As the market continues to push for efficiencies and innovation, with more re/insurers seeking to access specialised risk, the MGA model will continue to be an attractive approach to access the market. We expect the structures to mature further in line with market forces.

What is an MGA?

An MGA is an intermediary with delegated authority from one or more re/insurers to perform functions that would traditionally be carried out inhouse. The MGA acts on behalf of the re/insurer and may be granted authority to initiate and receive proposals, issue policies and collect premiums. Thus the MGA underwrites insurance using capital provided by the re/insurer. The re/insurer, as the capital provider, is accountable for any payments required under the policies.

MGAs work for the re/insurer; they bring the underwriting experience, while the re/insurer brings the balance sheet. A broker, by contrast, works for the person or client buying insurance.

The risks of the MGA model

Arguments have been made against the MGA model, which industry leaders have recently highlighted. An MGA usually earns commission on what it underwrites, while somebody else carries the losses. This can create an incentives mismatch.

In practice, the structure can often be even more complicated. MGA structures can include a fronting carrier in the middle, a panel of re/insurers behind it and a second agent underneath, each of which will have its own fees. By the time a risk reaches whoever is actually paying for it, three or four parties have already extracted a fee.

Relatedly, underwriting authority may be delegated to an MGA, but the re/insurer remains responsible for the risks. As a result, the re/insurer must ensure that the delegated authority fits within its own risk framework. As regulatory scrutiny for outsourced functions continues to increase, parties should implement a robust corporate governance framework and ongoing monitoring to satisfy their regulatory obligations.

Re/insurers that operate with effective oversight and foster collaborative relationships with their MGAs will be in a good position to benefit from the expertise and access to market the MGAs provide while managing associated risks.

The case for MGAs

Most carriers cannot become experts in every corner of the insurance market. Underwriters spend years developing expertise such as how to price drone risk on a film set, professional liability for law firms or parametric cover for a satellite operator, and it is rarely a generalist sitting inside a large re/insurer. MGAs allow capital to reach that kind of specialist knowledge without a re/insurer having to build it from scratch.

The incentives problem discussed above can be surmounted, such as profit commissions that pay out only if the underwriting actually performs. These arrangements are not new, but capacity providers are increasingly expecting them. MGAs that are most successful at winning new business are largely those that can demonstrate effective governance and transparent oversight by showing how they identify, manage and respond when underwriting goes wrong.

The driving forces behind MGA growth

While people often explain the rise of MGAs by looking at the availability of capacity (i.e. re/insurers and alternative capital providers wanting to deploy capital through MGAs), that is only a partial account.  Changes in the kinds of risk MGAs are being asked to write have shifted.

Property catastrophe risk is repricing faster than the annual renewal cycle can keep up with, and a growing share of new capacity wants triggers it can model with precision rather than waiting on a loss adjuster’s assessment months after the event. Parametric products suit the MGA model, which requires narrow, technical, data-led underwriting and does not require a large claims department for support.

Additionally, geopolitics, such as trade and supply chain exposure, now move with a tariff announcement or a sanctions update. This arises on a timeline unrelated to the insurance renewal calendar and can impact pricing instantly. Political risk and trade credit business, both lines in which MGAs have a foothold, increasingly have to reprice in response to the news cycle rather than waiting until January or July.

The introduction of AI-assisted pricing and submission triage is increasing the pace at which good MGAs can assess and quote a risk, and the firms doing it well are pulling ahead on both speed and loss ratio. A faster pricing model that has not been properly tested is just a faster way to get the price wrong, which brings the conversation back to governance.

These pressures discussed above, among others, are not going away and tend to reinforce each other. Climate volatility makes parametric structures more attractive, geopolitical instability makes speed more valuable and the underlying technology to deliver is maturing at the same rate. The MGAs that will succeed are those built around that combination from the outset.

Why Bermuda is well placed for MGA evolution

While new MGAs are being incorporated each year, Bermuda registered 25 new special purpose insurers and 10 new collateralised insurers in 2025 alone, with this pace holding into 2026, according to the BMA’s own published statistics. The collateralised reinsurance, ILS funds, sidecars and special purpose insurer capital sit alongside traditional rated balance-sheet capacity, and it has been concentrating here for years. Each of which often seeks MGA services.

The Bermuda Monetary Authority (BMA) licenses and supervises MGAs directly, with its own code of conduct and fit-and-proper tests. The result is that key governance questions, such as who oversees underwriting and how conflicts are managed, are in front of the BMA before the licence is granted, rather than left for a capacity provider to discover after a book has gone wrong. As such, these are all considerations that should be taken into account when establishing the relationship between the capacity provider and the MGA.

Key terms to get right

While commercial strategy and underwriting expertise are key to the success of an MGA, the legal framework and relationship with the capacity provider are equally important. A well-drafted agency agreement should clearly define the scope of the MGA’s underwriting authority, including the lines of business, underwriting limits, claims handling and reporting obligations. It should also support aligned incentives. Additionally, governance oversight and regulatory compliance, together with performance evaluation and transparent termination provisions, should be clearly agreed between the parties. This will be the bedrock for reducing operational and regulatory risk while providing commercial certainty and alignment.

The next phase for MGAs

The market is already moving in the direction the critics want. Several of the largest traditional re/insurers have sharply reduced their MGA participation over the past two years. However, fronting carriers and alternative capital stepped in quickly to fill the space, so the capital itself has not gone away. Capacity providers are doing far more due diligence before they commit to an MGA now. This involves properly reviewing the loss history, examining the data behind the pricing, and asking important questions about whether the MGA has its own money on the line.

The structural trend worth watching over the next two years is MGAs being built alongside their own dedicated capital from the start, rather than going out to find capacity once they are already trading. We are seeing more and more a common theme of alignment whereby MGA platforms are being structured to retain an economic interest in the business they originate, aligning the interests of the MGA and the capacity provider. Sidecars and bespoke collateralised structures are increasingly part of these structures.

Bermuda’s depth in special purpose insurers and collateralised vehicles makes it well suited to that and, as a result, best placed to accommodate this trend.

First Published in Bermuda Risk Review – Bermuda:Re+ILS,  August 2026