AM Best, a global credit rating agency, said that although insurance companies have become increasingly picky about the underwriting capabilities they provide and pay more attention to underwriting performance and long-term profitability, the delegated underwriting enterprise (DUAE) market still maintains strong growth momentum.
in its latest Best’s segment market reporting, managing general agents adapting to changing needs and increasing scrutiny, AM Best said 2025 marked the fifth consecutive year of growth in direct premiums for the DUAE industry, which includes managing general agents (MGAs).
According to the National Association of Insurance Commissioners, direct written premiums will increase to $108.7 billion in 2025 from $92.3 billion the previous year.
AM Best said that while business continued to expand, market conditions became more demanding. While DUAE helps insurers develop specialized products and respond to emerging risks, the agency believes the market is entering a period where underwriting discipline takes precedence over premium growth. Capacity providers are scrutinizing performance more closely, with a greater focus on sustainable loss ratios and long-term underwriting quality, it said.
“It’s not just about capacity producers being more picky,” commented David Blades, associate director at AM Best. “Insurers looking for long-term success rather than short-term market share expansion are becoming a more intentional focus. In addition, tighter economic conditions in renewal negotiations also pose serious challenges.”
AM Best maintains its stable outlook on the DUAE industry, reflecting its view that the licensing business continues to play an important role among insurers and reinsurers. According to the agency, the market benefited from strong activity in excess and surplus (E&S) lines, although growth in this segment has slowed over the past 12 to 18 months.
The rating agency expects surplus insurers to seek more cautious expansion as competitive pressures increase. Even so, AM Best believes the industry’s long-term growth prospects remain supported by a broad range of capital providers and continued investment in technology and skilled personnel.
AM Best Industry Research Analyst Helen Andersen added: “The maturing MGA market requires greater discipline in constructing portfolios and the successful adoption of newer technologies to improve workflow efficiency and improve responsiveness to emerging risks.”
AM Best also said its performance assessment (PA) continued to support its stable outlook for the industry. The evaluation provides an independent, forward-looking assessment of DUAE’s ability to serve its insurance partners. The agency said the latest assessment reflects continued demand across the market, while also highlighting the impact of slower growth in the surplus lines market and changing conditions in the reinsurance industry.
The report found that a slightly higher proportion of MGAs will be authorized to underwrite risks and manage claims on behalf of carrier partners in 2025 compared with the previous year. AM Best says an increasing number of organizations now have underwriting rights in more than three-quarters of licensing agreements.
AM Best also noted that despite the growth in trading activity, investor interest in the DUAE market remains strong. The agency said strategic partnerships are now more common than outright acquisitions, with outright acquisitions accounting for only a small portion of deals.
