[Watch and Read] Demand for delegated underwriting on the rise

MGAs and other third party entities bring targeted expertise to the insurance industry, says AM Best’s Dawn Walker

Demand for delegated underwriting authority enterprises such as managing general agencies will remain high, according to AM Best analyst Dawn Walker.

In a deep dive into the DUAE market with Bermuda:RE+ILS, Walker, AM Best’s associate director for industry relations, shared insights into this rapidly evolving sector.

Walker describes the DUAE market as "highly specialised third-party entities that insurers or reinsurers contractually delegate certain functions to, such as underwriting and claims handling”.

This broad category includes MGAs, MGUs, cover holders, and programme managers.

The model allows insurers to “efficiently access niche markets and leverage DUAEs’ specialized expertise without having to develop these capabilities in-house”.

But why the rapid growth? With $77 billion in direct premiums written through DUAEs in 2023, the market saw an 8% growth despite nuanced reporting shifts.

Walker pointed to "new entrants, collaborations between carriers and DUAEs, and strong profitability in the surplus lines market" as driving factors.

She also noted: "DUAEs continue to show momentum in hybrid fronting and startup partnerships."

Walker likened traditional carriers to "large tankers" unable to pivot quickly, while DUAEs were "small tugboats" offering agility and innovation.

For startups, she emphasized the need for "unique expertise, access to niche markets, strong distribution channels, and investment in technology."

Walker is optimistic about 2025: “The expectation is that niche expertise and tailored solutions for specialty lines and emerging risks will remain in high demand.”

Challenges like rising reinsurance costs persist, but innovation in data analysis and tech-enabled efficiencies keep DUAEs competitive.

For a comprehensive analysis, including regulatory insights and strategic recommendations, click here to watch the video.

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