AM Best is maintaining its market segment outlook for the delegated underwriting authority enterprise (DUAE) segment at positive, citing its sustained growth and performance on a global basis and the ongoing ability to address underserved and emerging risks.
An additional factor partly contributing to the positive outlook is the technology and talent within the segment that continue to drive innovation, according to a new Best’s Market Segment Report, titled, “Market Segment Outlook: Delegated Underwriting Authority Enterprises.”
The report cites several offsetting factors, namely the tight capacity that is noticeable for certain risks, the uncertainty looming over the fronting market and the ongoing and evolving economic challenges.
AM Best defines a DUAE as a third party appointed by a (re)insurer through contractual agreements, to perform underwriting, claims handling and other administrative functions on behalf of its partners. DUAEs comprise entities such as managing general agents, coverholders, program administrators, program underwriters, underwriting agencies and appointed representatives.
“The DUAE segment is still burgeoning with opportunity despite capacity constraints, specifically in the property market,” said Greg Williams, senior director, AM Best. “Our research shows that DUAEs are expanding their share of premium written across the broader insurance market, while new entrants keep growing in number.”
AM Best’s research has identified 654 managing general agents (MGAs) that generated direct premiums written in the United States of more than USD 65 billion. Insurance carriers striving for organic growth find the direct access DUAEs provide to policyholders to be profitable. The report notes that significant growth has occurred with DUAEs forming captives to take part of the business they produce as capacity partners look for greater alignment.
AM Best has not witnessed a sector-wide pullback of capacity for DUAE sourced business in 2023 and does not expect one in 2024. Reinsurers were prudent in their deployment of overall capacity at year-end 2022 and again at mid-year renewals, and even more so regarding the underwriting property risks. DUAEs active in reinsurance placement faced similar challenges to primary insurers, such as tightened terms and conditions, increased retentions, reduced limits, and lower ceding commissions.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=337919 .
To view a video with AM Best Financial Analyst Riley Parnham on the DUAE segment outlook, please visit http://www.ambest.com/v.asp?v=duaeoutlook1223&AltSrc=182 .
Leading AM Best analysts will review 2024 market segment outlooks for the U.S. insurance industry’s major segments, including DUAE and the global reinsurance industry in an online briefing scheduled for Tuesday, Dec. 12, 2023 at 2:00 pm EST. To register for the briefing, please go to http://www.ambest.com/conference/USMB2024 .
To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp .