Delegated underwriting authority enterprises benefit from excess and surplus

Investments in technology and talent have further fueled the segment’s expansion.

AM Best has maintained its positive market segment outlook for the Delegated Underwriting Authority Enterprise (DUAE) sector, citing sustained growth and niche expertise. 

The sector continues to expand its market share globally, driven by strong premium growth and its alignment with the insurance industry’s demand for specialty products. 

The DUAE segment has benefited significantly from growth in the excess and surplus (E&S) market, supported by elevated catastrophe activity and a favourable regulatory environment that has shifted more premiums into surplus lines. 

Strategic, long-term partnerships between carriers and DUAEs are also increasing, enabling capacity support across diverse business lines and geographies, rather than solely by individual programs.

Investments in technology and talent have further fueled the segment’s expansion. However, AM Best’s report highlights concerns over potential challenges tied to its reliance on the E&S and fronting markets. 

Reinsurance capacity constraints could lead to tighter capacity, reduced commission income, narrower underwriting margins, and weaker bottom-line performance. Additionally, rising exposure to reinsurer credit risk and concentration risk remains a concern for DUAEs.

Whilst the sector’s prospects remain optimistic, these challenges could impact its long-term sustainability.

AM Best defines a DUAE as a third party contracted by a (re)insurer to perform underwriting, claims handling, and administrative functions. 

This includes entities such as managing general agents, coverholders, program administrators, and underwriting agencies.