Quality over quantity: managing the dynamic MGA start-up pipeline in 2025

As we approach 2025, there is a notable surge in start-up MGA activity and the launch of innovative, niche or tech-driven firms. We are witnessing a transformation that is exciting and indicative of a larger trend towards specialised MGAs driven by client outcomes.

However, this growth is not without its obstacles, including capacity constraints, a challenging rating environment and increasing regulatory oversight.

For DA Strategy alone, we recently launched Crux Underwriting, which secured a $400mn in terrorism capacity from Lloyd’s for its first binding authority agreement. This exemplifies the partnership between the right MGA and the right capacity providers.

Elsewhere, another of our appointed representative MGAs, Volt UW, has emerged in the energy transition sector, equipped with a starting capacity line of $25mn for onshore and renewable energy risks. This strategic backing from Lloyd’s syndicates and investors positions Volt UW to capitalise on the growing demand for energy solutions that align with global sustainability efforts.

Innovative, niche and tech-driven start-ups can’t be discussed without mentioning the epicentre for this, which is the Lloyd's Lab. A standout initiative within this space is the FutureMinds Venture.

Lloyd’s Lab and its innovators are not only reshaping delegated authority, but are also cultivating client-centric, problem-solving, fast-paced and scalable start-ups.

The emergence of these new entrants reflects a strong trend towards quality over quantity in the MGA landscape. Start-ups are increasingly focused on niche propositions that combine entrepreneurial underwriting expertise with high-quality capacity and disciplined underwriting practices.

This strategic alignment will be crucial for new MGAs in 2025; our pipeline is showing that these start-ups know the complexities of the market and want to navigate and pinpoint solutions for clients in ways that have never been seen before.

Capacity alignment and underwriting discipline are critical as MGAs seek to build sustainable specialist businesses. With increasing competition for capacity, MGAs must ensure that their business plans are not just ambitious but backed by data and grounded in long-term viability.

The era of rapid growth without a clear vision to long-term profitability is behind us – the focus has shifted to creating resilient business models with unique offerings that emphasise risk management, sustainable profitability, quality data and strong and deep relationships with capacity providers.

This disciplined approach will enable MGAs to weather market fluctuations and remain attractive to investors and carriers, whilst embracing a culture of responsible underwriting that prioritises quality over volume.

The optimistic outlook is tempered by significant challenges. The current capacity constraints and the fluctuating rating environment present hurdles that MGAs must address to maintain growth trajectories.

As more players enter the market, competition for capacity will intensify, potentially impacting pricing strategies and profitability.

Additionally, regulatory demands are more stringent than ever, necessitating that MGAs not only comply with existing standards but also stay ahead of evolving regulatory expectations. The burden of compliance can be daunting, and MGAs must invest in robust governance frameworks to ensure sustainable operations.

Despite these challenges, the outlook for the MGA sector in the UK and Europe is positive. There is continued growth driven by the increasing demand for specialised insurance solutions that traditional markets struggle to accommodate.

The focus on technological innovation and streamlined processes is empowering new MGAs to differentiate themselves and thrive amid competition.

Moreover, with a growing emphasis on sustainability and risk management, the market is ripe for MGAs that can offer tailored products addressing contemporary challenges.

This positions the sector for significant expansion as we move through 2025 and beyond. The potential for niche players to carve out substantial market share is vast, especially in areas such as environmental insurance, cyber risk, and emerging markets.

The future of MGAs in the UK and Europe is bright, underpinned by innovation and a keen awareness of market needs. As we enter 2025, the mantra will undoubtedly be one of strategic growth, quality offerings and an agile service to customers in an ever-changing insurance landscape.

With the right support systems and a focus on quality partnerships, the MGA sector is poised to continue to prosper and change the face of the industry for years to come.

Kaj Pankhania is MGA director at DA Strategy