What is a managing general agent? This question is one we are often asked by our producer-clients—typically after we advise them to remove the term “managing general agent” from their agreements with insurers. While we can spend time diving into the uses, history and evolution of managing general agents (often referred to as MGAs), this article will instead focus on what, exactly, it means to be an MGA.
Managing General Agent
General factors. The determinative factors for whether an individual or entity is an MGA can be broken down as follows:
1. Any individual or entity who manages all or part of an insurer’s business (including the limited management of a division, department or underwriting office of the insurer); and
2. Acts as an agent for such insurer, by performing the following three functions, either in its individual capacity or together with affiliates, regardless of the agent’s title (i.e., whether referred to as “agent,” “MGA,” etc.) and regardless of whether the MGA has authority from the insurer to perform these functions:
A. Produces gross direct written premium equal to or more than 5% of the policyholder surplus of the insurer (as reported in the last annual statement of the insurer in any one quarter or year); and
B. Underwrites gross direct written premium equal to or more than 5% of the policyholder surplus of the insurer (as reported in the last annual statement of the insurer in any one quarter or year); and
C. Either
i. Adjusts or pays claims in excess of $10,000 per claim; or
ii. Negotiates reinsurance on behalf of the insurer.
