Soft Market, Recession Delivers Stronger Managing General Agencies

Managing general agents have a positive attitude about what’s to come in the next year. The soft market and recession forced many MGAs to get better at what they do, says Mark Rothert of the Portland, Ore.-based Ron Rothert Insurance Services Inc., and incoming president of the American Association of Managing General Agents (AAMGA). As a result, today’s MGA is much stronger than just a few years ago, he said. And most are gearing up for new business as the economy rebounds and entrepreneurs open new ventures. Below are excerpts from Rothert’s recent interview with Insurance Journal‘s Andrea Wells.

Insurance Journal: How has the soft market and economy impacted MGAs? Have current conditions provided any new opportunities?

Mark Rothert: I think there’s going to be some real shakeout as far as some of the standard carriers are concerned. We’re beginning to see combined ratios for the industry go up. The overall written premium is going down. We’ve seen a lot of cancellations coming through on small businesses. But in the last year, that has all sort of fallen by the wayside, and we’re starting to get inquiries about new businesses. We’re seeing a lot of inquiries about in-home business. That tells me that there are a lot of entrepreneurs out there that are looking to get back into business. And it’s going to be MGAs that are going to be there to provide the coverages for them.

IJ: How would you describe the financial health of MGAs now compared to a year ago?

Rothert: I think they’re much more stable than they were. Starting when things were crashing around everybody’s ears in 2008, there was some people that had some tough times. But now everybody has gone through the difficult times. They’ve made adjustments on the way they do business. They’ve improved technology … As a result we are seeing a lot of MGAs now that are much stronger than they probably were three or four years ago. [T]he ones that are good business people survive and the ones that don’t have a tendency to fall by the wayside. … The MGAs that are here now are in good financial condition and I think they’re looking forward to what’s coming down the road.

IJ: If the federal government were to play a larger role in regulating insurance, how might that impact MGAs?

Rothert: From a licensing standpoint, it might make life a little easier and maybe even from a taxing standpoint. But one of the problems that exists is what happens on the East Coast isn’t necessarily the same as what’s going on in the West Coast. And federal regulators have a tendency to paint with a very broad brush and that can have a negative impact on what happens in the various states. So federal regulation in some aspects it might make life a little bit easier, but overall I don’t necessarily think that’s good for the industry.

IJ: AAMGA’s Annual Meeting is next week. What you think the major topics of discussion will be this year?

Rothert: One of the major topics has been market conditions and where the market is going. What’s going to be discussed are the opportunities that are out there, what’s available, what kind of risks people are seeing. I think it’s going to be a very good meeting. I’m looking forward to it.

AAMGA’s 84th Annual Meeting is May 23-26 in Palm Desert, Calif.