The MGA Pre-Launch Guide: Strategy, Costs & Founding Team

Insillion's MGA101 eduseries offers expert-led, practical insight into how the MGA model operates and is designed for Start-Up MGA founders and insurance professionals. 

This video features Christopher Lowell, Managing Director at InnSure & Co-founder of Greenie Re, and John Willemsen, Founder-CEO of Willemsen Advisors LLC, formerly of Accelerant, Arch Re & Munich Re. Having reviewed over 3000 MGA business plans across his career, John Willemsen demystifies the MGA pre-launch roadmap, advising Start-Up MGAs on preparing for their journey ahead.

The Key Aspects of a Successful MGA 

When starting out in the MGA space, a founder should ensure that their underwriting, distribution and operations are solid. These 3 aspects form the core of a successful MGA, and technology solutions help enhance an MGA's product offering when the foundation is strong. 

Within these broader aspects, Willemsen highlights 4 factors that make up a truly differentiated Start-Up MGA.

What factors contribute to an MGA's success? 

1. Differentiating Factor: What separates an MGA from the 2000+ programs already in the market? This means evaluating whether the Start-Up brings something unique to market by way of their product, service, or distribution strategy. 
2. Niche: Picking a niche and figuring out the best way to approach that market, contributing something unique to it. 
3. Underwriting Discipline: The most important factor that ultimately determines an MGA's profitability and sustainability. 
4. Readiness of their Business Plan: Having a clear vision and a well-researched plan assures capacity providers of an MGA's capability to carry out business operations smoothly. 

What factors make up a great MGA founding team? 

Whether they start off as friends or collaborators, a great founding team combines expertise with mutual trust and support, says Willemsen. Successful partnerships can include both insurers and non-insurance subject-matter experts, as long as there's respect and appreciation for each other's disciplines and perspectives. 

Irrespective of their professional backgrounds, founders must collectively possess the depth of insurance knowledge required to engage in informed discussions and make confident choices.

Where do Distribution and Tech sit within the MGA model? 

Distribution is a critical, often misunderstood aspect of the MGA model.  

A Start-Up could have a truly differentiated product that still sits on shelves if the distributor has concerns over product value or pricing. Therefore, it's important that MGAs: 1. Get honest with themselves.  2. Create a distribution plan. 3. Do a SWOT analysis & really acknowledge their weaknesses.  4. Work on closing those gaps. 

An innovative product deserves to reach the people it can help the most, and only a solid distribution strategy enacted early in the roadmap can make that happen. In fact, Alexis Vaughn, Founder-CEO of Off Course Consulting, Lloyd's Lab Mentor and former AVP of Cowbell Cyber advises that MGAs have an 18-month distribution strategy in place even before securing capacity. 

Willemsen also notes that MGAs have a clear advantage over carriers in technology implementation and adoption timelines, with data analytics serving as a key differentiator.  

Chris adds that it's important for MGAs to assess their business and apply technology only where it adds real value. The term "tech-forward" can be misinterpreted, leading to unnecessary adoption of tech and deviation from core business activities.

Demystifying the MGA Pre-Launch Journey  

The Carrier Perspective 

A carrier expressing interest in an MGA's product is not the same as physically signing a contract with them. All too often, the MGA has yet to give the carrier a reason to say yes or no. Therefore, the carrier might continue having informal conversations with the MGA till they find a definitive reason to proceed. 

Read our blog on capacity provider expectations and concerns for more detailed insight. 

The Venture Capitalist Perspective 

VC investors are generally concerned with when and how they'll see returns, and whether the MGA can quantify and support its vision. When meeting investors for a brief conversation, they'll appreciate a well-prepared team that can answer questions with strong, data-backed insights, says Willemsen.  

Preparing a VC or Carrier Pitch Deck 

A VC or carrier pitch deck needs to be well-organized, highlighting relevant data; with a team that's clear on the nuances and finer details not mentioned in the deck. The insurance experts that are part of the formal capacity/funding conversation have undoubtedly participated in many similar conversations prior to this one.  

The depth of insurance knowledge the founding team possesses shapes their pitch and approach, and is vital to any capacity or funding conversation, emphasizes Willemsen. 

Validating an MGA's Idea before Capacity Conversations

Start with an informal conversation with a trusted contact within the carrier world — no pitch deck needed. The purpose of this chat is to refine the founder's understanding of product-market fit, as early-stage MGA founders often lack key insights that carriers expect. 

Approaching ideal risk markets like Munich Re, Arch Re, and Swiss Re without enough clarity or preparation can create a weak first impression. The back-and-forth that follows may strain relationships, exhausting potential capacity partners before formal capacity discussion even begin. 

Costs & Timeline: What Do An MGA's first 6 Month Look Like?  

A Start-Up MGA's first 6 months are determined by the time taken to secure a capacity contract. This might take anywhere between 3 to 10 months, sometimes even longer. 

Start-Up MGAs should be prepared for a 12-24 month launch period going in. After securing a capacity contract, licensing, admitted paper filings (which can take up to 12 months), and other regulatory steps can significantly delay go-to-market. 

It takes roughly $1.5 million USD to get through the launch period, says Willemsen. This amount depends on employee salaries, operational costs, etc. He also recommends starting small, with a maximum of 3 people who can take on all the responsibilities involved in launching an MGA.