Insurers and managing general agencies are working together to created a more stable business model and a long-term favorable outlook for growth, says a study on MGAs released Tuesday.

“An improvement in risk management practices has been successful in helping insurers manage MGA relationships and reduce systemic risks,” said the report by Hartford, Conn.-based investment management firm Conning & Co.

“The size of the MGA market relative to the broader commercial market confirms insurers' commitment to using MGAs as producers of premium,” says the report, “Managing General Agents, the World of MGAs: A Look at the MGA Specialists.”

According to the report, Conning's analysis of statutory filings found that MGAs produced $25.7 billion of direct written premiums, which represented about 9.7% of commercial premiums in 2012.

Insurers that are most active in using affiliated and nonaffiliated MGAs to produce premium tend to be larger global insurers and reinsurers and midsize insurers with a business model focused on sourcing premium through the MGA channel, according to the report.

“Insurers of all different sizes use MGAs to produce premium, and larger insurers represent a meaningful portion of our database. However, MGA relationships often represent a more meaningful source of premium for the small and midsized insurers,” says the report.

According to the report, three-fourths of MGAs offer some type of commercial coverage, and MGAs that write only commercial lines produce 70% of all premium. This increases to almost 85% if MGAs that offer a mix of both commercial and personal lines are included.

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The report states that there is an expectation of lower rates over the near term in the property/casualty commercial industry because it is at a point in the underwriting cycle where it is overcapitalized.

However, “The long-term outlook appears more favorable, as the MGA market appears well-positioned to grow from current levels,” says the report.

“Continued technological evolution of the MGA business model is likely necessary to achieve longer-term growth. A willingness to develop further technological capabilities has the potential to enhance the MGAs' product offerings and help maintain (or potentially increase) their market share position within the commercial industry,” it says.