What is an MGA?
A Managing General Agent (MGA) is a specialised agent of an insurance company that performs certain tasks under delegated authority from that insurance company.
The three main tasks that insurance companies typically outsource to MGAs are:
- 1
Underwriting
The pricing and acceptance of risks from insurance buyers (often via brokers).
- 2
Policy administration
The issuance and management of insurance policies.
- 3
Distribution
MGAs frequently interact closely with insurance brokers to distribute insurance products but, unlike the broker, the MGA’s fiduciary duty is always to the insurance company, not to the insurance buyer.
An insurance company may outsource additional functions to an MGA, notably claims adjustment (determining the validity of claims and the sums that need to be paid) and claims settlement. Claims against policies issued by an MGA are always funded by the insurance company, which must satisfy regulators as to its ability to meet potential claims. MGAs are thus “asset-light” companies that do not need to maintain large balance sheets to meet claims.
The relationship between an MGA and an insurance company is enshrined in a document known as a binding authority, or binder, which stipulates the terms on which the MGA may accept (“bind”) risks on behalf of the insurance company.
Ready to Join FASE?
Applications for FASE membership are open to MGAs that have been in business for more than a year and underwrite more than €500,000 in annual premium. Membership is also open to insurance and reinsurance companies seeking to partner with European MGAs, and to service providers that support the sector.