Carrier Management viewpoint says AI splits insurance value chain

Carrier Management published an Oct. 15 viewpoint arguing the insurance value chain is splitting in two. On one side are capital providers; on the other are service firms handling underwriting, distribution, program administration and claims. The piece, 'The Unbundled Insurer Emerges in Age of AI as Value Chain Fragments,' says AI is accelerating a separation insurance consultants predicted in 1999. It concludes those consultants called the outcome correctly and misjudged only the timing.

MGAs wrote roughly $128 billion of U.S. premium in 2025, up 12% in a year when the market grew 5%, and their share rose from 3.6% in 2012 to about 11.6% in 2025. Those figures come from Conning's 13th annual MGA study cited in the piece, which also found underwriting expertise migrating from carriers to managing general agents. In the same survey, 61% of insurers said they are expanding their use of MGAs, and none said they plan to cut back.

Some 78% of MGAs use a fronting carrier to access capital, and fronting premium rose from $6 billion in 2020 to more than $22 billion in 2025, on Conning figures cited in the piece. The fronting carrier supplies the licensed paper between an underwriter and the capital behind it.

Once underwriting and paper move elsewhere, the viewpoint argues, a carrier is left with a balance sheet and an investment portfolio. This publication has tracked a similar migration on the life side, where insurers are being told to add asset classes while the capital charge attached to holding them is still being drafted.

The underwriting judgment that governs losses sits further out the chain, at MGAs and fronts rather than inside the carrier holding the capital. This publication reported on Sept. 30 that AM Best flagged unrated reinsurance behind $30 billion of fronting premium, and that a Conning study found fronting programs' initial loss ratios developed adversely in each of the past seven accident years.