Finance

There are two key financial considerations for any MGA: financial strength and income.

Assessing an MGA’s own financial strength must take account of staff and premises costs - as well as professional and regulatory fees. This requires having a robust strategic plan linked to the business budget.

Projections of future income should always be realistic and make due allowance for potential external pressures.

The financial health of a capacity provider depends both on solvency (its ability to meet long-term financial commitments) and liquidity (its ability to fund short-term obligations - allowing for how quickly cash can be realised from investment programmes or reserves).

A solvent company has more assets than debts, i.e. a a positive net worth and a manageable debt load. A company with adequate liquidity may have sufficient cash to pay its bills, but might risk becoming insolvent due to its inability to raise cash when it is needed.

A healthy company is one that is solvent and has adequate liquidity. Financial ratios applicable to liquidity and solvency are discussed below.