MGA v Virtual Insurer: How does our cornerstone capacity deal make a difference?
Published On : 18 May 2018
This month we announced Pen’s first cornerstone capacity placement – a deal worth £550m GWP in Household and SME business over five years. But what does it mean for our brokers?
In a volatile market, scale and financial strength are key: While we don’t want to keep banging on about it, increased regulation and heightened uncertainty are part and parcel of the current insurance industry outlook; think GDPR & IDD in 2018 and Brexit in 2019 and beyond; to help weather this environment MGAs have never needed size and financial stability more.
It’s a vote of confidence in our past and future results: The financial stability of the markets our brokers trade with has never been more important. This deal is a vote of confidence in Pen’s past and future results, as well as the virtual insurer model that we’ve built; it’s also a vote of confidence in us by Legal & General, a FTSE 100 company who will in turn provide A-rated backing for Pen on a multi-year basis across a wide variety of Pen’s own branded products. I view their support as a huge compliment to the team we have in Pen – I’ve been in the insurance industry for almost 30 years and this transaction is pretty unique in terms of its size and its breadth.
The size of the deal allows us to continue our rapid pace of investment: Over the past three years we’ve been investing in our systems, in our people (particularly our analytics and pricing teams) and in product development – in short all the things that increase our competitiveness and the quality of what we can deliver to our broker partners. This new deal means we can continue to build on these foundations – by way of an example, watch out for new products on Pen Central, our e-trading hub, as well as a greater range of cyber products.
It’s not just the scope of the deal but its terms that will make a difference: A cornerstone capacity placement has more in common with a capital arrangement than a standard delegated authority arrangement. Why? Because of the extent of the authority that has been delegated to us: wordings, rates, claims are all in our control, allowing us to continue to build out our offering and innovate sensibly but at real pace across the wide variety of products covered by this transaction.
Control for Pen means flexibility for our brokers: We know that what brokers value most is a great, responsive service – you want Pen to listen to your clients’ needs and respond quickly with quality, tailored products. Increased control over our business means we can offer more of this to you and your clients.
The first of many? We are always looking for ways to improve what we deliver for our brokers and policyholders; achieving this deal puts us in a great position to create other, similar capacity placements, so watch this space!