Contents

BUILDING TOGETHER

Adrian Jones, now Acrisure chief

of sta for international and global

markets, says the relationship between

private equity and DUAEs is like

“building great big ships together.”

Private Equity Pouring Into DUAE Market

28

as Investors Seek Liquidity, Growth

DUAEs offer the chance to participate in high-margin businesses that are

easier to buy and sell and have made significant investments in technology,

investors and analysts say.

by Anthony Bellano

P

rivate equity investors have pumped increasing

amounts of capital into the delegated

underwriting authority enterprise market in

recent years amid advancements in technology and

better economic opportunities.

Recent investments have hit the billion-dollar

mark. In November 2023, one such DUAE,

Amwins Group Inc., said it completed a $1 billion

recapitalization transaction with its shareholder group.

As part of the transaction, Dragoneer Investment

Group, Genstar Capital, SkyKnight Capital L.P. and

Anthony Bellano

is an associate editor. He can be reached at

anthony.bellano@ambest.com

.

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certain employee shareholders bought $1 billion

in equity from more than 375 Amwins employee

shareholders and the Canadian pension investor

Public Sector Pension Investment Board.

“The numbers coming in now are dramatically

higher than in the past,” said Emilio Figueroa, founder

and chief executive officer at Indemnity Lab, a company

that focuses on investment strategies for private equity

and venture capital firms. “Even companies with

modest profits compared to their books are being

offered valuations at 20 times EBITDA, a significant

increase from two decades ago. This trend is both

intriguing and transformative for the industry.”

Adrian Jones, Acrisure chief of staff for

Photo by Casey Montague/AM Best

DUAEs

“The focus is on establishing economies

of scale, ensuring broad distribution,

and diversifying across various industry

sectors. This diversified approach not

only enhances market attractiveness

but also sets the stage for a more

favorable marketplace exit.”

Emilio Figueroa

Indemnity Lab

30

best platform for them to make an investment in

an MGA and use that as a platform to build off of,

acquiring other MGAs. They’re looking at backing a

management team, and their strategy is looking at how

that management team wants to grow.”

DUAEs also have made significant investments in

technology, which helps them better analyze data in

volatile markets and attract talent from the tech industry,

AM Best said in a November 2023 Market Segment

Report. “In addition to the entrepreneurial opportunities

that attract talent, DUAEs have proved attractive to

technology professionals such as data scientists and

engineers,” according to

Market Segment Outlook:

Delegated Underwriting Authority Enterprises.

“Technology spend is a recurring theme for many

MGAs as the bespoke nature of how individual firms

are organized typically results in a high degree of

customization and ongoing programming support,”

Power said. “Many sellers benefit from becoming a

part of a larger organization that brings additional

capacity, distribution and marketing prowess.”

These investments have helped make DUAEs more

stable than they were 20 or 30 years ago. “When MGA

became a dirty word, many were relatively small, fly-

by-night operations. Someone who had $1 million or

$2 million would start up a DUAE, write a bunch of

business, and get paid on volume,” Jones said. “Now,

many DUAEs are much more institutionalized. They

have stronger management teams, more ability to attract

people with expertise around operations and risk, better

capitalization, and better governance and oversight.”

It’s also easier to buy and sell a DUAE than it is to do

the same with a traditional carrier, Jones said. “Carriers

have balance sheets. Balance sheets are messy. They have

US P/C Industry: Top 20 Insurers by Direct Premiums Written Via MGAs, 2021 and 2022

($ Millions)

Houston Casualty

Consumers County Mutual Ins

National Casualty

Essentia Ins

Heritage Property & Casualty Ins

Direct General Ins

Wesco Ins

Virginia Surety, Inc

First Protective Ins

Producers Agriculture Ins

California Earthquake Authority

United Specialty Ins

Starr Surplus Lines Ins

Trisura Specialty Ins

State National Ins, Inc

Jefferson Ins

Universal Property & Casualty Ins

Scottsdale Ins

American Agri-Business Ins

Philadelphia Indemnity Ins

2021

2022

05001,0001,5002,0002,5003,0003,5004,000

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Source:

from

Best’s Market Segment Report: Insurance Market Embraces Delegated Underwriting Authority Enterprise Model

, published April 27, 2023.

DUAEs

DUAEs Play Important Role in Global Markets

But analysts say DUAEs also are helping insurers grow,

playing an important role in the growth and distribution

of insurance in Europe and Asia-Pacific, according to the

AM Best report. Europe’s biggest and most sophisticated

DUAE market is the United Kingdom, and established

DUAEs in both the U.S. and the U.K. are growing and

diversifying into other countries.

“This has led to a number of new startups and

acquisitions of existing businesses by DUAE groups

based outside the U.S.,” said AM Best, noting it

expects the trend to continue and drive further growth

in global markets.

While many startups are entering the market, the

investment is more focused on well-established niche

MGAs that have a value set based on specialization,

Power said. “Some of the venture capital money

that has come in to back newer insurtech startups

has probably not fared as well as those focused on

acquiring established MGA platforms.”

He said many of the MGAs One80 Intermediaries

has acquired are established firms with a long history

of successful underwriting. “Acquiring firms, and

being great at integration, is an important skill set,

but actually building a successful enterprise is a far

greater undertaking,” Power said.

“I think there’s also an increased willingness on the

part of risk-bearers, whether that’s insurers or reinsurers,

to work with specialist underwriting managers,”

Jones said. “Specialty insurance has had a very strong

last couple of years, and a lot of predictions are that

it will continue to be strong going forward. It’s not

always possible to have specialists all reside inside your

particular insurance company. It makes sense in many

cases to delegate authority to expert underwriters.”

The change isn’t just in the way private equity

views DUAEs; the role of the MGA also has

changed over time. “There are quite a few MGAs

that used to be more of a distribution channel, with

products developed by the carriers. Now, they’re

writing business,” Parnham said. “Now they’re able

to explore new products, new lines of business.

We’ve got a bit of an ever-changing landscape in the

world with some new risks, and MGAs are playing

a bigger role in product development and risk

selection than they were 10 to 20 years ago.”

While they may not be holding onto these

companies to build an empire that will last forever,

what they’re creating may last a little longer than they

may have 10 or 20 years ago, industry analysts said.

“We have seen that companies might hold

acquisitions for a relatively short period, around

six to seven years at most, with the primary goal of

achieving aggressive growth,” Figueroa said. “The

focus is on establishing economies of scale, ensuring

broad distribution, and diversifying across various

industry sectors. This diversified approach not only

enhances market attractiveness but also sets the stage

for a more favorable marketplace exit.”

He said there are “easily a dozen private equity

firms that have been very active in the distribution

space, and they’ve generally done quite well.”

32

DUAE Investors

Private equity has made several investments in delegated underwriting

authority enterprises over the last few years. Listed are select transactions,

including some details about the deals and participants.

Avesi Partners

Origin Date:

2021

Headquarters:

Stamford, Connecticut, USA

Insurance Deals:

In January, MGA Sands Point Risk

launched with what it called “tremendous support” from

Avesi Partners. Sands Point focuses on transaction liability

insurance, including representation and warranties, tax

liability and contingent liability insurance.

Additional Notes:

Avesi has $880 million of equity capital

under management that is focused on partnering with

companies that are lower-middle market, privately held,

and family owned in various sectors including health care,

insurance, technology and business services.

Alliant Insurance Services Inc.

Origin Date:

1925

Headquarters:

Irvine, California, USA

Insurance Deals:

Alliant in 2022 acquired Trivedi

Capacity Associates, a program administrator that

is focused on commercial risks, particularly in the

community association and condominium association

markets.

Additional Notes:

Trivedi and its risk purchasing group

HARP became part of Preferred Concepts, a real-

estate-focused MGU that is located within the Alliant

Underwriting Solutions programs division.

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DUAEs

LAB WORK

From left, Pamela Corey, Seneca Insurance Co.; Lisa Lounsbury, Big I New York and Connecticut;

and Jonathan Selby, Founder Shield, participate in a recent InsurTech NY Digital MGA Lab Distribution Day panel

discussion moderated by David Gritz, InsurTech NY.

InsurTech NY’s MGA Lab Helps Startups

34

Become Fully Operational Digital MGAs

The organization’s co-founders say they have identified a growing need for

digital MGAs.

by Lori Chordas

I

n 2022, InsurTech Fund, a venture capital fund

associated with InsurTech NY, began accepting

applications for its first Digital MGA Lab. The

three-month program has been designed to assist

digital brokers, analytics startups and European

managing general agents in becoming MGAs in

North America.

Today, the program continues to grow and is on

its second cohort of participants, InsurTech NY’s

co-founders say.

“The idea for the Digital MGA Lab came about

really from demand in the industry,” David Gritz,

InsurTech NY managing director and co-founder,

said during the organization’s recent Digital MGA

Lori Chordas

is a senior associate editor. She can be reached at

lori.chordas@ambest.com.

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Lab Distribution Day. “We had been running our

growth stage accelerator program for three years.”

“What we realized is that most of the accelerators

in the insurtech space were really tailored toward

software-as-a-service companies that could benefit

insurance carriers or insurance brokers,” he said.

“But there was no program out there to help the

startups that actually wanted to go out in the market

and sell their own insurance policies.”

“All the way back to 2015, there were a lot of

great insurtechs that became very well known,

whether it be Hippo, Lemonade, Metromile, States

Title. But a lot of those—they ended up having very

unprofitable books of business because they grew

too quickly,” Gritz said. “We wanted to take the

lessons from that initial Insurtech 1.0 and provide

those lessons to Insurtech 2.0 and 3.0 and really

DUAEs: MGA Lab

Photo by Patrick Keppel/AM Best

Much of the focus of the Digital MGA Lab and

industry members is on helping participants build

and scale an MGA from the ground up.

While there is no secret formula to creating an

MGA, Gritz said, there also isn’t a “Creating an

MGA 101” course or a

For Dummies

book available.

Gritz said most of the experience out there sits

in the heads of people who have done it before. “As

part of the program, we have essentially a layered

mentoring. There are four different types of mentors

that every startup is assigned to. They’re assigned to

an actuary, an underwriter, an attorney, and what’s

called a program mentor—someone who’s started,

grown and taken to scale an MGA before. They’ve

essentially been in the trenches doing what the

founders are doing and can tell them about their

lived experiences,” he said.

Mentors work with a startup for the entire three

months of the program, and some provide mentorship

on a bi-weekly basis, Lew said. “Some actually just

work with them side-by-side and create like an

underwriting guideline as well. Each of the mentors

have different roles. Some of the startups have more

knowledge about how to create an MGA, but many of

them don’t, so the mentorship is really critical for the

startups to actually come up to speed,” he said.

Kaenan Hertz, chief insurance officer and

co-founder of Ahoy! Insurance, which insures

boaters, is one of those mentors. “Mentoring some

of these startups and having gone through what

they’re going through now in terms of setting up

an MGA, developing the relationships with the

fronting carriers, the distribution partners, the

software vendors that you need—I feel I have a great

level of experience to bring them to help shortcut

some of their experiences,” he said. “It’s a wonderful

opportunity to network, not only with the other

mentors, but also with the startups across a broad

area of products and services.”

Sedlak, of Green Shield Risk Solutions, said

mentors are also mindful of the more unusual

aspects of the insurance environment. “Industry

mentors are helping us understand the areas of

focus we need to have as a new company to make

sure that we’re not going to get ourselves into

regulatory trouble as we build our product, to

ensure that we’re focusing on where we need to be

to build a profitable business, and they’re helping us

understand where the market is going. How do we

continue to build this business over time?”

“My specific role is to help companies like this

where they have a great idea, they have technology,

they have maybe new data, new perspective, but

may not necessarily be insurance people, may not

have had years of insurance experience like a lot of

companies do,” said Somil Jain, principal & senior

consulting actuary at Lewis & Ellis.

“I come in and bridge that gap. I help people

take an idea and turn that into a viable, profitable

product. And we do that where we can bring the

actuarial piece, we can bring in the insurance program

management piece and all the coverage forms, all of

that into and turn that into a real product,” he said.

“We created this program really from a need in

the marketplace. We heard from startup MGAs that

there isn’t really anything out there to help them,”

said InsurTech NY’s Gritz. “Even other accelerator

programs are very much similar to our growth stage

where it’s across all types of insurance companies. But

ultimately, the needs of a digital MGA are completely

different than software startups. We really focus on

creating that specifically for them.”

AM Best TV

Scan to watch interviews from InsurTech NY’s

2023 Digital MGA Lab Distribution Day.

36

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DUAEs: MGA Lab

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