An Augmented approach…

Program Manager sat down with Andrew Matson, CEO of Augment Risk, to discuss dynamics in the sector and how the firm is bringing a fresh perspective.

The MGA/programs space has been one of the fastest-growing areas of the industry in recent years. What is your outlook for the sector?

The MGA/program space has indeed experienced significant growth, driven by its ability to offer specialized underwriting expertise, nimble market access and innovative solutions for underserved niches. Looking ahead, we see a continued positive trajectory for the sector, though it will likely evolve and face new challenges as it matures.

One of the key drivers for sustained growth is the increasing demand from carriers and reinsurers seeking diversified, profitable distribution channels. MGAs, with their specialized knowledge and flexibility, are well-positioned to fill this need, especially in sectors where traditional players may not have the same expertise or agility. Additionally, the rise of insurtech and data-driven underwriting models will further enhance the capabilities of MGAs, allowing them to become more efficient and precise in their risk selection and pricing.

However, maintaining this growth trajectory will require MGAs to adapt to changing market conditions, regulatory developments and shifts in capital availability. In particular, the ability to secure stable, long-term capacity from capital providers will be a key differentiator. At Augment Risk, we see this as an opportunity to deepen relationships between MGAs and their capital partners through structured solutions and multi-year partnerships, which will help to stabilize capacity and provide a foundation for sustained expansion.

While we anticipate continued growth in the sector, it will be the MGAs that embrace innovation, build strong capital relationships and maintain underwriting discipline that will lead the way and set the pace for the future.

Capacity is king for MGAs. What strategies are you helping clients deploy to maintain stable capacity through the cycle?

We believe in a more dynamic and tailored approach than simply sourcing capacity on a product-by-product basis. Our strategy focuses on developing long-term, partnership-driven capital solutions that go beyond traditional short-term agreements. For MGAs that demonstrate strong growth potential and operational excellence, we work to build multi-year, multi-line capital arrangements that foster deeper collaboration between MGAs and their capital providers.

By leveraging structured solutions and aligning the interests of MGAs, carriers and investors, we create capacity frameworks that are both resilient and scalable. These solutions are designed not only to support the MGA’s current product lines but also to facilitate growth into new markets and product areas. This ensures that capacity remains stable across the cycle, even in challenging market conditions.

In addition, we emphasize the importance of flexibility and innovation in capital deployment. Our solutions are built to address carrier needs, such as accessing new distribution channels, while also creating opportunities for MGAs to expand their offerings and attract new business. This alignment of interests – underpinned by thoughtful structuring – ensures that MGAs and their capital partners can navigate market fluctuations more effectively, maintain stable capacity and, ultimately, achieve sustainable growth.

US casualty concerns have been high on the agenda in the last year. What are some of the solutions and strategies MGAs and program carriers can use to manage earnings volatility from elevated loss cost trends?

The rising loss cost trends in the US casualty market have undoubtedly made it more challenging for MGAs and program carriers to maintain earnings stability. However, there are multiple strategies to mitigate this volatility while fostering long-term financial health.

A key solution lies in improving data-driven underwriting and portfolio management. MGAs and carriers need to leverage advanced analytics to better understand and price emerging risks, particularly those driven by social inflation, increased litigation and other external pressures. Utilizing real-time data and predictive modeling can enhance risk selection, allowing for more precise pricing and proactive management of loss costs.

Another important strategy is diversifying reinsurance structures. Moving away from standard excess-of-loss reinsurance to more tailored solutions, such as structured reinsurance and loss portfolio transfers, can help MGAs and carriers spread risk effectively across their portfolios. This not only stabilizes earnings but also provides greater flexibility in managing both current and future loss development.

We’ve seen that integrating recurring legacy transactions into a carrier’s strategy can play a pivotal role in mitigating earnings volatility. By proactively addressing legacy liabilities through well-timed legacy transactions, MGAs and carriers can unlock capital trapped by older reserves and reallocate it toward growth or managing current risks. These recurring transactions help smooth earnings over time and reduce the exposure to long-tail liabilities, which can otherwise exacerbate financial strain during periods of rising loss costs.

Additionally, these legacy solutions provide a buffer against the unpredictable development of past losses by offloading the potential for future deterioration to external capital, often on more favorable terms. This allows carriers to better focus on underwriting current business while mitigating the financial drag from prior liabilities.

In combination with smart underwriting and reinsurance strategies, recurring legacy transactions provide a robust framework for MGAs and program carriers to manage volatility, maintain liquidity and position themselves for long-term success, despite the challenges posed by elevated loss cost trends.

Retained property losses have been a big issue for carriers recently because of higher reinsurance attachment points. What non-traditional solutions can help manage frequency losses?

One of the most effective solutions for managing frequency losses in the current environment is parametric insurance. As carriers retain more risk due to higher reinsurance attachment points, parametric solutions provide an efficient way to address frequent, smaller losses. Instead of relying on traditional indemnity models, parametric insurance triggers payouts based on predefined events, such as a hurricane hitting a specific wind speed or rainfall exceeding a set threshold.

The primary benefit is speed and certainty of payment – once the trigger is met, payouts are made quickly without the need for a lengthy claims process. This allows carriers to access liquidity immediately and manage frequent losses with more agility.

Parametric insurance is especially valuable in addressing climate-related risks and the rising frequency of extreme weather events. Carriers can tailor parametric policies to cover specific risks, such as storms or floods, and reduce the impact of retained losses.

We see parametric insurance as a powerful tool for managing retained property losses, offering flexibility, faster payouts and better alignment with the risks carriers are increasingly exposed to. By incorporating parametric triggers into their risk management strategies, carriers can more effectively manage volatility and retain control over their balance sheets.

Do you think alternative capacity, including ILS, has a long-term future in the MGA/programs space and if so how is it best harnessed and structured?

Yes, alternative capacity, particularly through ILS, has a strong long-term future in the MGA/program space. The need for flexible, innovative capital solutions is increasing as MGAs and program carriers look to scale their businesses and navigate a challenging market environment. ILS provides an attractive alternative to traditional reinsurance, offering a way to tap into capital markets, diversify capacity sources and, ultimately, manage risk more efficiently.

One of the key reasons ILS will have staying power in this space is the growing demand for tailored, non-correlated risk among institutional investors. MGAs, with their specialized and often niche underwriting, offer unique access to these risks. This alignment creates a natural opportunity for ILS to play a more significant role in supporting MGAs as they seek to grow their programs while navigating the evolving risk landscape.

To harness ILS effectively, it’s crucial to structure deals that align the interests of all parties – investors, MGAs and carriers. This can be achieved by creating multi-year, multi-line transactions where the risk is more evenly spread, offering investors predictable returns while giving MGAs the long-term stability they need. Structured solutions such as collateralized reinsurance or sidecars are ideal vehicles for integrating ILS into the MGA space, allowing the pooling of capital while limiting the counterparty risk that comes with traditional reinsurance.

Moreover, transparency and data are key to successfully structuring ILS in this space. Investors in ILS are increasingly looking for better visibility into the risks they’re underwriting, making it vital for MGAs to use sophisticated data analytics and modeling to provide clear insights into their portfolios. This data-driven approach not only helps attract alternative capital but also ensures that both investors and MGAs can adapt to changes in the risk landscape more dynamically.

We focus on developing bespoke structures that bring together MGAs and ILS investors in a way that balances risk and reward while promoting long-term partnership. By combining ILS capacity with a well-thought-out risk transfer strategy, MGAs can unlock new growth opportunities, secure stable capacity and drive sustainable, profitable expansion.

Augment Risk is coming to the end of its second full year of operations. Talk us through the build-out to date and which areas you are prioritizing as you look to continue hiring and expanding your offerings.

As we approach the end of our second full year of operations, it’s remarkable to reflect on the progress we’ve made. I’m coming to the end of my first year at the firm, and during this time, I’ve seen firsthand the strong foundation that’s been laid and the clear vision for growth that has been set in motion.

Over the past two years, we’ve focused on building out a highly specialized team and developing tailored capital solutions for MGAs and program carriers. Our success has been driven by how we structure our business units to align with the way clients think about capital, enabling us to execute multiple strategies in tandem. This integrated approach allows us to unlock capital across various avenues – whether through structured reinsurance, legacy solutions, or alternative capital strategies – delivering value for both carriers and investors while addressing their specific needs holistically.

An important focus has been the development of our Client Solutions division, designed to unify all the firm’s offerings. This division supports our front-end brokers with integrated services and project management, ensuring that every aspect of a client’s capital strategy – whether risk transfer, structuring, or legacy management – is smoothly executed. By connecting all parts of the business, Client Solutions allows us to deliver a comprehensive service tailored to clients’ evolving needs.

Looking ahead, our priority is to continue building on this momentum. We are focusing heavily on expanding our presence in the alternative capital space, particularly through the development of captive solutions, as well as continuing to grow our legacy solutions offering, which helps carriers manage their balance sheets more efficiently through recurring transactions.

Bringing on talent that shares our vision for innovation and understands the nuances of capital markets and risk transfer will be key as we scale.

As we continue to grow, our goal is to remain agile and maintain the client-centric approach that has served us so well. The focus is on identifying market opportunities and developing solutions that truly meet the evolving needs of our partners.

Talks us through how Augment Risk fits into the Altamont ecosystem. What opportunities does that present to collaborate with others there?

Augment Risk operates within the Altamont ecosystem, but we maintain a clear independent focus in how we deliver capital solutions and services to our clients. While we benefit from being part of a wider network of expertise and relationships, our commitment is to operate as an impartial and distinct entity, ensuring that all strategies and solutions are tailored specifically to our clients’ needs.

Being part of Altamont offers strategic advantages, such as access to broader market insights, industry trends and potential partnership opportunities. However, we engage in collaborations only where it aligns with the goals of our clients and supports their growth objectives, ensuring that our independence and client focus are never compromised.

In this way, Augment Risk is positioned to leverage the strengths of the Altamont ecosystem without being tied to any specific company or agenda. We remain committed to providing tailored solutions that are fully aligned with our clients’ objectives and designed to support their long-term growth.