Interview: MGAA’s James Gerry on what makes an MGA

August 17th, 2016

GB Underwriting CEO James Gerry is interviewed in Insurance Post by Martin Croucher.

One of the challenges that James Gerry, the recently elected chair of the Managing General Agents’ Association, consistently encounters is over what exactly an MGA is. He is finding it’s not a question with a simple answer.

“The man on the street will know what an insurance company is. If you ask him what a broker is, he will be able to tell you with reasonable accuracy,” says Gerry. “But if you ask him what an MGA is, you’ll get a blank stare.”

As insurers begin to delegate more authority for underwriting, claims and other functions, the MGAA is also asking the same question of itself.

Gerry, who has served as CEO of Dual, Thistle and most recently his own venture GB Underwriting, was elected chairman of the MGAA board in March. Aside from the experience he brings to the table – 30 years in insurance, 12 years of which were spent managing MGAs – he’s also passionate about what he describes as the “MGA space”.

“I would argue that it’s the fastest growing, most dynamic and most exciting segment of our market,” he says.

MGAs are agile and responsive

He likens MGAs to gunboats, more agile and responsive than their battleship-sized insurance carriers. “Where larger insurers might have legacy issues, size and scope issues, the MGA community is generally made up of smaller, more nimble, more entrepreneurial businesses.

“They’re able to adapt more quickly, they’re able to respond to opportunities more quickly. A lot of carriers that see a good opportunity might be hamstrung by their own legacy in terms of IT and business structure.”

Locations worked: New York; London

Originally from the US, Gerry started out with a year at Chubb in New York before being given the opportunity to work in London. He worked as director of underwriting at Brockbank, a Lloyd’s syndicate, for a decade before moving to Dual as CEO.

In 1993, he was one of the only Americans working for Lloyd’s, so he was something of a novelty. Even today, he remains conscious of his own accent. “You can tell from my accent I sound a bit like Dick van Dyke,” he says. “Next year will be my 30th year in the UK. But people say it sounds like I just got off the boat. I can’t shake off my American accent. But that can be good, right?”

Gerry says the system of delegated authority in Lloyd’s meant that when MGAs began to emerge in the early 2000s, people were less sceptical than they were elsewhere.

Lloyd’s saw beyond the ‘disaster’ headline

“In the US, the acronym MGA was synonymous with disaster,” he says. “They were viewed as cowboys and kind of on the margins of the markets.

“When I joined Dual, particularly in the Lloyd’s community, there wasn’t a reluctance to embrace MGAs but it was slower with the insurance company market. Because the insurance company market, unlike Lloyd’s, was typically following a localised distribution pattern. Rather than looking at contracting with an MGA, they’d look to open an office in Bristol or Manchester. That’s how they would get their regional distributional play.

“Whereas in Lloyd’s, that wasn’t the model. Everything was concentrated in a building in EC3; we were looking at who we could partner with that could bring us the capacity. Without wanting to sound unfair to the company market, after a while they started to scratch their heads and wonder if you can’t beat them, why not join them.”

“They started to realise that a lot of these MGAs are not like the US wild west cowboys, they are disciplined professional underwriting units that have a lot of localised knowledge, expertise and business acumen. Some of the barriers and reluctance to work with MGAs began to fall away after that.”

He says he joined Dual when the company was “still nascent, but already very successful”. Asked whether he feels happy about what he achieved at Dual, he pauses. “Golly,” he says after a while. “We took a terrific business and were able to really solidly underpin it with good management information.”

“[We were able to introduce] professional contractual standards and reporting, a sensitivity to staying on top of our compliance obligations, and – critically – a real focus on underwriting profitability and success.

“It’s grown tremendously since I left and its appetite for growth and expansion is well documented. How it’s changed since I left, I couldn’t really say.”

Consensus can be difficult

Gerry says, without specifically addressing Dual, there were a lot of MGAs that were starting to offer as broad a product base as some insurers.

Five words about him: Optimistic; Passionate; Empathetic; Confident; Contented.

“Some of those models of broader product probably work for some MGAs and I’m not here to poo poo that. I just believe the bulk of our members tend to be those that represent the smaller, more nimble, more focused enterprises.

“It sounds like I’m passing judgement, but I’m not. If the principal design of the MGA owner is to ramp it up for sale, they might be very much focused on top line premium growth. How many products, how much business, how much can we get through the door? Then someone is going to want to buy that access to premiums.”

The board of the MGAA is comprised of leading businessmen and women from firms like Manchester Underwriting Management, Inet3, Advent Solutions Holdings and Miramar Underwriting.

Gerry explains that can throw up its own set of problems. “One of the challenges is that my role is to build consensus among our board and our members – not all of whom have the same views on everything,” he says.

“One of the challenges is that sitting around the board with me is – surprisingly enough – a lot of successful entrepreneurial businessmen and women with strong views and strong opinions. That brings some challenges. As chair, I’d sooner the challenge of trying to galvanise and draw consensus out of people who have a proven track record of successful business, than be surrounding by a bunch of yes-men and sycophants where no one has got a particular view.

“Is it different from running one’s own business? Yes, it must be. I’ve got quite a good brain trust around me and that’s incredibly helpful. This is going to sound over the top, but I would argue that at the board table, I’ve got some of the brightest and best and most capable people trading in the insurance sector in the UK right now, so I’m very fortunate.”

Gerry says one of the biggest areas of debate now is precisely over what type of MGA fits within the remit of the MGAA. “The delegated underwriting segment in the UK is one of the world’s most exciting and dynamic,” he says.

“It continues to change. The entrants into the space continue to grow, but the way in which they are constituted and look to trade isn’t the same. One of the challenges we have is how broad our church is.

“Our membership right now represents some of the largest MGAs in the UK right now and some of the smallest – and a whole range in between. We’re concentrating now on issues of delegated underwriting authority but there are also issues of delegated claims authority, there’s issues of other forms of delegation and outsourcing of professional insurance services that aren’t broking and aren’t underwriting. So, are they in our shopping trolley or not?

“One thing we’ve got to do is to stay true to our core fundamental assessment of what we’re about, which goes back to: Where is your primary fiduciary duty to? Is it to the carrier or to the end customer?

“As we’re putting, and considering putting, more into our trolley, if we stay true to that core, then it’s not like we’re pushing one of those trolleys with wonky wheels – it’s not like we’re drifting off somewhere we don’t want it to go.

“As an association, we are prepared to consider: What do our stakeholders want of us? What are the regulator and our carrier members looking to us for? That’s the path we need to steer, that we build consensus and stay true to our purpose.”

Regulation has hit hard

Even though MGAs are not risk-bearing, the segment has still been hit hard by the introduction of Solvency II in January. They are now required to provide a lot more paperwork to their carrier partners, which is used in their own solvency filings.

“I don’t know if it affects the agility of smaller MGAs, but it certainly has raised the cost base,” says Gerry. “There were suggestions that Solvency II was going to drive small businesses to the wall, and everyone was going to get out as it was just going to be too costly. However, history has demonstrated that those claims were exaggerated.

“But the cost of compliance and regulatory reporting continues to go up, year in and year out. Our association is concerned about that. As a mate of mine once observed, ‘are we simply going down the path of being the most clearly documented failure in the history of the insurance market?’ You’re doing all the paperwork, but one of the issues is: How is that transforming corporate personalities? How is that affecting the risks people are taking?”

Post met Gerry two days before the referendum vote, so he declined to speculate on what effect a Brexit might bring. However, he believes the attitudes of regulators should change.

“I’m not in the camp of saying if we leave Europe everything becomes easier,” he says. “One of the blessings and curses of operating in the London financial services market is that our regulator has typically taken the gold-plating tact.

“A number of our members and those in the London financial services are happy that the world looks at us as one of the better regulated, more professional marketplaces, which is fantastic – great news. As practitioners in that, we say: ‘Are we going to be commercially disadvantaged with some of our non-UK competitors because we have continually gone above and beyond what the core regulatory promulgation was?'”

He says the MGAA shares the same goals with the Financial Conduct Authority, but differs at times on the waves of regulation introduced to achieve those goals.

“Is that the most effective, most efficient or most profitable way of bringing about those kind of changes in conduct, standard or reporting?” he asks.

“We’ve occasionally felt that some of it has been a bit heavy-handed. These regulations continue to be rolled out on our members and we are going to work hard to make sure it’s being done in a way that is a little bit more even-handed and pragmatic than perhaps it has been in the past.”

He concludes by comparing the FCA to the NHS in terms of the scope of its remit. “It does a good job with the resources that are available to it, but it is a very, very big job.”

CV

March 2016 to Now: Chairman, Managing General Agents Association
2011 to Present: Chairman, GB Underwriting
2008 to 2011: CEO, Thistle Insurance Services
2003 – 2007: CEO, Dual International
1993 to 2003: Director of underwriting, Brockbank Syndicate Management

Hobbies: Skiing; Gym training; Faith

Five words about him:
Optimistic; Passionate; Empathetic; Confident; Contented.

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