Growth metrics

Here at Program Manager we spend a lot of time writing about new program deals hitting the market, partnerships between MGUs and capacity providers – and, of course, the continued rolling of new hybrid fronting carriers and platforms off the production line.

Many players in the sector are privately held businesses or divisions of larger organizations, meaning it can be hard to find publicly available evidence of growth at individual participants and the overall programs market.

In the last few weeks the fourth quarter and full-year earnings season has provided a number of examples of surging activity in the sector, however.

As we report in this month’s issue, Randall & Quilter’s program management platform Accredited added 18 new deals in 2020 that helped its contracted premium jump 52 percent to $1.28bn.

Gross premium written during the year on the programs it has in its portfolio was up 46 percent to $538.9mn, while economic commission revenue grew even faster at 76 percent to $22.7mn.

The Accredited platform has yet to see new business added from its new E&S carrier in the US but maintains it has a strong pipeline of deals across its operations for 2021.

Another hybrid fronting carrier that revealed strong 2020 growth was Trisura, whose Canadian parent reported that the platform contributed GWP last year that surged by 145 percent to $647.2mn.

The Mike Beasley-led operation took the total number of programs on its books from 29 in Q4 2019 to 48 at the end of 2020.

And fee income more than trebled from $8.0mn to $24.2mn year-on-year.

Among the other privately-held hybrid fronting program carriers the majority also talk of strong top line growth and a healthy pipeline of new program deals.

Growth drivers

So where is the growth coming from?

Clearly a major factor is the broader pricing environment, and the impact that is happening on the growth of existing programs.

There are also a wealth of new program opportunities as established and new MGAs look to bring capacity to products to meet demand in segments where traditional carrier capacity has retrenched or new opportunities are being created by insurtechs and other innovative approaches.

The E&S market in particular is seeing a flood of demand for products that is fueling growth opportunities for traditional program carriers, hybrid fronting carriers, the MGAs that write on their behalf, and the reinsurers that support the business.

Of course, there has been some churn among program carriers.

Spinnaker is known to have retrenched from some areas of the program market after its acquisition by Hippo last year.

And in its recent Q4 and full year earnings State National’s parent Markel revealed that GWP at the fronting platform was down 10 percent year-on-year to $2.1bn.

That was driven by the cessation of two large programs earlier in 2020 that were underperforming.

However, Markel co-CEO Richie Whitt said that State National is expected to grow again in 2021, with a full pipeline of new business and a significant pick-up in activity.

The signs are that 2021 will be another year of strong growth for the sector. And that means that investors looking to back new ventures targeting the business will continue gathering on the sidelines.