To The Point: A MarshBerry Video Series

Should Independent MGAs Take Underwriting Risk? What the Market Is Really Saying

Insight from George Bucur, Managing Director and Co-Head of MarshBerry’s Special Practice on valuation, delegated authority platforms, and why participating in underwriting risk may hurt valuation more than help.

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Over the past several years, a clear trend has emerged in the specialty insurance marketplace: the largest delegated authority platforms are increasingly assuming underwriting risk.

But does that strategy make sense for independent MGAs?

Despite what large platforms are doing, risk participation often works against independent MGAs that are looking to sell. What works for billion dollar platforms does not necessarily work for independent MGAs.

Why Large Platforms Can Take Risk

The biggest delegated authority platforms are uniquely positioned to retain underwriting risk because they typically have:

  • Private equity backing that can fund and support dedicated risk vehicles
  • Significant premium volume, often hundreds of millions or billions of dollars
  • Diversified portfolios, with 20–30 programs and long underwriting track records
  • Advanced actuarial insight, allowing them to manage risk through sidecars, or captive structures, etc.

For these platforms, retaining a sliver of underwriting risk can generate additional cash flow and enhance carrier returns.

The Critical Question for Independent MGAs

The question MarshBerry hears most often is: Should an independent MGA participate in the underwriting risk of its book of business? From a valuation perspective, MarshBerry’s answer is clear: Try to avoid it if you can.

What Buyers Actually Value

Based on a broad spectrum of completed transactions, MarshBerry consistently sees that:

  • Buyers do not place value on underwriting risk held by independent MGAs
  • In situations where MGAs participate in risk taking, the risk taking component is often carved out of the transaction entirely
  • Conversely, the services side (i.e. commissions and fees) of the MGA commands premium valuations

Why? Because service revenue is recurring, scalable, and predictable, which are the exact characteristics investors are looking for, as it translates to predictable, growing cash flows.

While there may be strategic reasons an independent MGA considers taking underwriting risk, it’s critical to understand how that decision impacts future valuation and transaction outcomes.

MarshBerry is a global leader in investment banking and consulting services, specializing in the insurance brokerage and wealth management sectors. If your firm seeks expert advisory guidance to refine your business strategies, drive sustainable growth, or facilitate a sale, MarshBerry is the ideal partner to support you in making these critical business decisions. Collaborating with a trusted advisor who deeply understands your business and the industry can help you maximize value at every stage of ownership.