MGAs ‘huge success story’ ‘at the forefront of innovation’ for reinsurance – AM Best

AM Best has tipped MGAs as the next “huge success story” for the reinsurance market, following in the footsteps of the burgeoning cyber market – where “insurance has demonstrated a solution for society”.

This is according to Greg Carter, managing director of analytics, Europe, Middle East and Africa and Asia Pacific at AM Best.

Carter was addressing delegates attending the rating agency’s briefing session at RVS 2025.

Reflecting on the opportunities that he believes the reinsurance market should be investigating, Carter used the growing cyber market as an example of “a huge success story for the industry” centred around “a risk that really didn’t exist 20, 25 years ago”.

According to figures published by Munich Re in April 2025, the global cyber insurance market is forecast to reach $16.3bn (£12bn) by the end of 2025.

Carter believes reinsurers “need to look forward” and explore “where does the next cyber market come from?”

Carter pinpointed to MGAs as the next important growth area, explaining that these underwriting businesses “are very much at the forefront of innovation in terms of distribution and product design”.

He explained: “Cyber is a huge success story for the industry – a risk that really didn’t exist 20, 25 years ago. The industry has found a solution, found a product and the market has grown well.

“I know we’ve seen softening in that market recently, but it’s still a profitable market and it is an area [where] insurance has demonstrated a solution for society. The industry [now] needs to look forward. Where does the next cyber market come from?

“One of the areas that we’ve seen in recent years is the growth of MGAs. MGAs are very much at the forefront of innovation in terms of distribution and product design. It may be from the MGA space that the next cyber market emerges.”

For other areas of opportunity, Carter listed record insurance-linked securities (ILS) growth and optimising capital structures to generate shareholder returns, artificial intelligence (AI) advances and supporting the primary carriers to address protection gaps.

Challenges on the horizon

On the flip side, Carter additionally discussed a number of challenges that the reinsurance market should be aware of as it enters 2025’s second half.

For example, although AI is an evident opportunity, he also flagged the technology as a challenge – especially with regards to cyber crime and the rise in deepfake technology. Deepfake is a form of AI that creates fake videos, images or audio recordings – often to depict people doing activities that they have not done.

Carter further noted that AI was attracting a lot of investment – he warned the audience about the risk of AI dependency and whether relying too heavily on AI could lead to unintended consequences.

Other challenges Carter defined included macroeconomic and geopolitical risks, climate change and private credit.

He continued: “Private credit [is] more of an issue for the reinsurance sector to watch longer term. It’s more of an issue for the US life and health sector at this point, but the increased use of private credit is an area that brings concerns to us in terms of liquidity and also in terms of transparency and understanding what the underlying assets are within private credit structures.”

Captive appetite

Stefan Holzberger, AM Best’s chief operating officer, commented that there is also appetite for MGAs to form captives.

He explained: “MGAs are more a player in the commercial market. They’re designing products. They’re really taking ownership over the performance of that book of business and, to the extent [that] they feel confident and comfortable with the long term loss ratios, they’re forming captives.

“Maybe there’s a reinsurer or a specialty player that’s assuming the majority of that book of business, but because of the level of profitability, they’re definitely happy to form a captive and take some of that on themselves.”

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