As the regulatory landscape surrounding the Delegated Underwriting Authority Enterprise (DUAE) market evolves, global authorities have introduced stricter compliance measures, risk management expectations and governance frameworks. Increasing alignment with international regulatory standards has highlighted the trend towards better monitoring of DEAE – although the application for DEAE is often indirect through carrier obligations.
The DUAE market, which includes managing general agents (MGAs), managing general underwriters, program managers and similar entities, plays an important role in the global insurance and reinsurance markets by enabling insurance companies to expand their market reach, increase underwriting flexibility and provide niche expertise across geographies. As DEA continues to expand its influence in global insurance markets, alignment with international standards is not only a regulatory requirement but also a competitive advantage.
Despite regional differences, there are some common regulatory themes that have emerged.
- Liability of Insurers: Delegation of underwriting authority does not reduce insurers’ obligations to regulators or policyholders.
- Licensing and Registration: Mature markets are required to be licensed, registered or otherwise formally recognized by their respective regulatory authorities to conduct underwriting activities.
- Solvency and Risk Management: Regulatory regimes increasingly require the provision of solvency and operational risk management either directly or through carrier supervision to the DEOE.
- Consumer Protection: Various authorities are mandating stronger controls to ensure fair treatment of policyholders by DUAE, along with complaint handling, disclosure and marketing standards as well as protection of client’s personal information.
- Auditability and Reporting: Active regulatory frameworks often require insurance companies to conduct regular audits, maintain transparent records and report material outsourcing arrangements to the authorities.
- Alignment with international standards: Even where DUAE-specific regulations do not exist, supervisory frameworks are often aligned with the Insurance Core Principles developed by the IAIS as well as Solvency II and Basel III to promote international comparability.
As DEOEs continue to expand their presence in the global insurance ecosystem, their role in enabling product innovation, geographic reach and operational efficiency has become increasingly important. At the same time, some insurance company CEOs have begun to express concern over rapid growth, noting that many new entrants are less experienced in the market. It is important for insurance companies, regulators and market participants alike to understand the nuances of DUAE supervision.
From a different perspective than the regulators, BEST’s performance assessment for DUAEs is designed to complement and serve as an independent, objective, non-credit opinion geared towards greater transparency in the DUAE sector. The performance assessment is globally applicable, and the assessment assesses the writing capabilities, governance and internal controls, financial condition, organizational capabilities and duration of DUAE’s depth and breadth of relationships in the market.
Regulators are using appraisal reports on these institutions because they provide hard-to-find information and high-level premium statistics. Performance evaluations support regulatory efforts as well as transparency in a growing sector.
New DUAE HUBS are emerging
Emerging doe hubs are competing to become hubs of underwriting assigned to their adjacent markets. For example, Singapore has emerged as a leading hub in Asia. Its Revised Insurance Act (Cap 142) (2003) places considerable emphasis on insurers’ accountability to the DEA, along with stronger requirements for financial and capital adequacy, consumer protection and risk management. Singapore’s regulatory approach promotes innovation in insurtech while protecting market practices, positioning the city-state as a model for balancing regulatory discipline with business growth.
Miami continues to gain traction as a hub for MGA as well – especially in terms of Latin American business writing. Many of the major insurance broking firms operating in Latin America – whether local or international – have offices in Miami, typically handling Latin American (primarily Central America) and Caribbean placements. Many MGAs based in Miami act as insurance brokers.
The United States remains the most mature DUAE market, and includes the most developed frameworks for monitoring DUAEs with a state-based approach to regulation. Lloyd’s role in the global insurance market and the use of patrons has also been cited as a driver of MGA growth in a number of global markets, including Australia and Belgium. Outside of the US and Lloyds, Europe represents a significant presence in the MGA space. However, insurance passporting rights do not automatically apply to DUAE. Instead, access rights depend on the licensing rules in the country issuing the license. This regulatory fragmentation between countries also applies in Latin America and limits opportunities for smooth cross-border DUAE operations in the region.
Other regions are at different stages of regulatory development, but those jurisdictions that have developed codes of conduct designed to address the unique operation of DUAEs are generally among the largest and most sophisticated users of DUAEs and show the greatest potential for sustainable growth.
The demands of the carriers are increasing
The DUAE market has seen a surge in capacity as it has attracted interest from providers such as the capital markets, insurance-linked securities (ILS) market, fronting/collateral markets and private equity. As a result, managers can now use multiple methods to access capacity. The sheer amount of capacity available in the market demands the amount of money associated with accessing and monitoring that capital.
Looking forward, several trends are beginning to shape the evolution of DUAE regulation:
- Digital Transformation: How will regulators apply traditional supervision models to digital DUAs, insurtex and embedded insurance providers? Cybersecurity, data protection and operational flexibility will be a focal point.
- Cross-Border Consistency: There may be efforts to harmonize international supervision through the IAIS, EIOPA and NAIC models. These efforts can reduce opportunities for regulatory arbitrage and facilitate global expansion for DUAEs. Regulatory arbitrage occurs when financial institutions take advantage of differences between regulatory regimes or jurisdictions for financial or operational benefits.
- Increased scrutiny of delegated bodies: This allows for rigorous audits, due diligence and contingency planning.
- Innovation Sandboxes: Some jurisdictions are offering regulatory sandboxes that allow digital-first DOEs to innovate under a controlled environment, balancing oversight with market development.
- Use of AI in Underwriting and Claims: DUAE may need to implement an ethical governance framework to ensure transparency and regulatory compliance.
- Disaster recovery and wind-up provisions: Regulators may require DUAE to implement emergency planning, similar to insurance requirements.
As the regulatory environment evolves, the ability to consistently and transparently assess DEOAs will be essential to maintaining trust, reducing risk and supporting sustainable growth in the representative model.
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