“With the soft market through most the early 2010s through to 2018, it was an opportunity for most people to keep their powder dry and not look to do anything too dramatic in most instances,” he said. “And then since the Decile-10 project and the turn in the market over the last couple of years, people are now seeing their chance to step out of their comfort zone and do something a little bit more entrepreneurial or a little bit more challenging. And some of that flows over into the delegated authority (DA) market, which is great.”
Brexit presented an especially interesting challenge to the sector, he said, as in the lead up to its implementation, there was a lot of thought given to how to access the EU market going forward. The bigger players sorted out their options early on and largely tended to set up their own entities within Europe to handle the transition. DA Strategy opted for this approach, setting up DA Strategy Global in Hamburg to aid MGAs who wanted to have a route to market without setting up a separate entity.
“That offers MGAs, particularly those based in London and elsewhere around the UK, an opportunity to second underwriters into DA Strategy Global so that they then are in an organisation that has an EU licence and passporting throughout the EU and can then underwrite that business, through DA Strategy Global. So what we offer is an economy of scale offering for those MGAs.”
Currently, DA Strategy has got a handful of clients, but adding further clients to this offering will enable the business to add sufficient scale to this model, allowing it to deliver a package offering to clients going forward.
It has been a fascinating mix of businesses that are interested in the facility offered by DA Strategy Global, Rowley said. Generally speaking, they have tended to be smaller businesses who, when they initially considered the implications of Brexit, likely did not consider themselves ready to go into Europe due to their smaller scale or limited business there. At that time, they did not see the business case for setting up a Brexit solution, he said, but they have since reached the scale where this has become necessary.
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“[For many], it’s now too late to set up their own entity in an easy way so they’re opting to use the DA Strategy model to have access,” he said. “So, typically that’s the smaller size firms. We’ve had [several businesses] come to us – we’ve had one come to us that is brand new and we had another that approached us very recently where they have had a new team come on board that they didn’t have last year which wants to write a significant proportion of EU business and they need a solution. So they’ve seen the opportunity to go into Europe, and now want to access it.”
This is an example of the range of businesses looking to access Brexit-friendly solutions, he said, a range that goes from new businesses, small existing firms who didn’t have the opportunity two years ago and existing firms who have taken on new teams that want to access that portfolio. For some of these businesses, there has been an element of waiting for the furore surrounding Brexit to die down before they elected to choose a solution. But the other aspect, he said, has been the capacities appetite to enter Europe. A lot of capacity providers were hesitant about going into Europe through an entity that they weren’t sure was going to be there for the long term.
They were thinking ‘let’s just hold back’, he said, but now that those capacity providers and other market players are getting back into the City to trade, there’s more of a relaxed attitude. Now carriers are opting to help firms who are looking to add a section to write European business, which is part of the reason why MGAs are now opening that door.
Going forward, Rowley does foresee continued interest in market players looking to enter the European market, particularly because a lot of the UK carriers are building a lot of their portfolios in that open market, direct business.
“So I think that though the DA business and the DA market, instead of growing as it has done over the last two decades, was pretty flat in 2020 and the first half of 2021, it’s now starting to pick up again,” he said. “And I think that activity should flow through into the demand for European access.”