INTERVIEW: ERIC MIGNOT, +SIMPLE & SERGEY GRAZHDANKIN, GMBC
MGAs can be lucrative for reinsurers—if they have the tools
The partnership of +Simple with GMBC opens up new levels of opportunity for reinsurers that want to support MGAs, and even greater diversification.
In Day 2 of Monte Carlo Today, the executives behind the strategic merger between +Simple, a European digital insurance distribution platform for small businesses, and GMBC, a tech-enabled master managing general agent (MGA) and reinsurance platform, described the synergies the deal will produce and its importance to European MGAs.
The merger opens up the opportunity for many more niche MGAs to leverage the platform—and potentially access new capacity. Because of the master MGA platform managed by GMBC, some of that may well be from reinsurers seeking diversification and a way of moving into niche risks without the operational costs and associated risks.
GMBC runs what it calls a “cooperation framework” for reinsurers that want to support MGA businesses—and also want access to tools and resources that will help them track that business performance and have necessary processes and risk controls in place. It already does this. Its partnership with +Simple now opens up new levels of opportunity for these reinsurers and even greater diversification.
“Reinsurers want to access this business. They want access to profitable niches but also transparency and stability,” says Sergey Grazhdankin, a co-founder of GMBC. “That’s very important because most of the time reinsurers are very high up in the value chain. They don’t have sufficient resources dedicated to MGA business. We provide them with the right tools but this partnership is also an enabler.
“+Simple has quite a substantial portfolio, probably similar to the size we have at the moment. But this allows us to offer larger package deals. Reinsurers like big deals. We can now aggregate certain parts of the portfolios and offer larger segments, which always attracts much more attention from a reinsurer in terms of a greater diversification and larger profit per deal,” he says.
“It is hard to compete with the big guys because of their scale.”
Eric Mignot, +Simple
Grazhdankin explains that for many types of niche business, especially where the end client is a small or medium-sized enterprise (SME), there can be scarce capacity: it is seen as too hard and costly to write and requiring too much specialist knowledge.
“While all the big composite re/insurers are fighting for commoditised risks, this business can be much more profitable. Each niche is individually too small for a reinsurer to position itself on that segment. But in aggregate that dynamic changes,” he says.
He adds that it can be a win-win for everybody. “It can be a win for the fronting carrier that didn’t have enough critical mass to offer the reinsurer and maybe its development has been held back by that lack of capacity. So the client is winning, we are winning, the broker is winning, the reinsurer is winning. Everybody is winning.”
More efficiency
Eric Mignot, chairman and founder of +Simple, says that the traditional nature of the industry means that reinsurers like the transparency this system offers.
“The number one question is usually: ‘who is the insurer, the risk carrier?’. They want to know the end client. This platform offers that understanding very clearly.”
He believes that writing this type of business will be attractive to smaller players which are seeking growth but unwilling to compete with the big composite insurers.
“What we see in terms of competitive dynamic is that if you’re a small carrier and you want to extend your business, you need specialisation to be able to position yourself where you are not competing on price and acquisition costs with the bigger players.
“We provide a platform where the insurer doesn’t need to do anything.”
Sergey Grazhdankin, GMBC
“It is hard to compete with the big guys because of their scale. We see a number of small carriers, local carriers or mutuals that want diversification and to grow their business but they don’t know how to do it right,” Mignot says.
“We’re now equipped with the GMBC platform to make that journey much easier for the small carrier to start working and developing through MGAs, which is probably one of the most efficient ways to develop business.”
Grazhdankin adds that the desire for diversification can take other forms. He cites German traditional carriers with excess capital seeking opportunities outside their home markets.
“Their challenge is the system to process the data and the non-standard products offered by MGAs. If they are from outside Germany, they do not fit into the local systems.
“We provide a platform where the insurer doesn’t need to do anything. They can just start writing new business. It’s a great way to start off diversification. Even for smaller, low key players, it’s a much better partnership for them.”
Another benefit of this end of the market—niche business—is that it is unaffected by wider market conditions.
“In a niche price is not the issue, capacity is. We are already in the hard market in those segments compared with a commoditised market—there has been very little capacity.
“That makes it good business for reinsurers. We are giving them access to a new kind of small business with higher prices and a higher margin,” he concludes.
Eric Mignot is chairman and founder of +Simple. He can be contacted at: emignot@plussimple.com
Sergey Grazhdankin is a co-founder of GMBC. He can be contacted at: grazhdankin@gmbcgroup.com
Main image: Shutterstock / rocharibeiro
