The leader of W.R. Berkeley Corp. has seen it before—some version of the MGA movie in which represented underwr
iting authority is given to market participants whose ambitions aren't always aligned with capacity providers.
President and Chief Executives Officer W. Robert Berkley, Jr. called out the potential market impacts of mana
ging general agents several times during a second-quarter earnings conference call this week, while he and othe
r executives also reported the specialty insurer's jumps in income and premiums each over 7% and a combined ratio of 91.6.
In spite of what he characterized as stable and solid results, and his forecast of high-teen to low-20s returns Fo
r the foreseeable future, Berkley has his eye on the cast of character
rs in this year’s remake of MGAs Come Into the Property/Casualty Insurance Market—particularly new entrants, reinsurers and private equity investors.
“There is no doubt that inherently, in many of the delegated authority models, there is a mismatch or a lack of alignment
nt of interest between those with the pen and those with the capital," he said. "It is not that all of these relationships are bad. Some of them are quite good. One just ne
eds to have their eyes wide open and understand that it is not a perfect alignment of interest and make sure that it is controlled appropriately,” he said, commenting on the general landscape.
Still, he said, “there has been extraordinary growth in the MGA space. A lot of it has been generated by new entrants that lack expertise.”
Watch More Image Part 2 >>>
“A lot of it has been supported by reinsurance capacity that seems to have an unquenchable thirst for growth without necessarily their finger fully on the pulse,” Be
rkley continued. “We’ll have to see how this plays out. Those that have been around for a long while have seen some versions of this movie.”
Adding investment bankers to this year’s cast of characters, Berkley said that within the last 60 to 90 days, Berkley execu
tives received “a starting number of inbound calls” from the bankers, gauging their interest in buying MGAs. “And typically, they are capitalized or owned by private equity,” he said.
The frequency of calls, he suggested, are “perhaps a leading indicator that the music is slowing down.”
“We’ll see who has a seat at the end, though oftentimes, that does take some time,” Berkley said.
Asked about W.R. Berkley’s response to these phone calls, the CEO said that while always being open to conversations, “it’s a pretty high hurdle to truly get us to want to engage.”