TMPAA: Optimistic outlook for programs market amid strong growth and profits

By Mia MacGregor Oct 29 - (The Insurer) - The outlook for the programs market remains optimistic despite various challenges, with continued growth and strong profit margins for many participants, according to the Target Markets Program Administrators Association’s latest biennial survey. The organisation’s 10th survey, which includes research and analysis by Zywave, reflects the perspectives of 99 program administrators, 70 insurers and 46 service providers. The findings highlight a rebound in the program sector from the slower growth and declining renewal rates seen in 2020. Premium volumes reached $110.8 billion in 2024, up 40% from $79 billion in 2022. TMPAA noted that this growth outpaced the broader commercial insurance market, where direct premiums earned rose by only 21.3% during the same period. Since the inaugural study in 2011, when premium volume was $17.5 billion, the programs market has experienced a 533% increase, the study said. Despite ongoing consolidation, the number of U.S. program administrators grew to 1,150 in 2024 from 1,100 in 2022, driven by new market entrants. This expansion comes as program administrators and carriers adapt to new pressures, technologies and opportunities, contributing to a solid outlook for continued growth, TMPAA said. The report highlighted that financial performance remains strong, with average program administrator revenue increasing by 49% to $20.6 million between 2022 and 2024. Nearly half of respondents reported profit margins exceeding 26%. However, renewal rates dipped to 82.3%, the lowest level since 2011. TMPAA noted that larger firms maintained stronger retention, suggesting that scale and operational maturity still play a key role in client loyalty. Rate movements have varied across different lines, with auto programs experiencing the most significant increases, while cyber, management liability and workers’ compensation pricing declined, reflecting broader market adjustments and changing risk appetites. TMPAA noted that lines of business with the highest proportion of rate increases also observed capacity reductions but were most likely to have new programs in development. A growing interest in non-traditional markets was noted, with 19% of program administrators using hybrid fronting models and 16% working with fronting carriers. While interest is measured, the trend indicates an openness to explore such arrangements as program administrators seek new ways to navigate a changing landscape, TMPAA said. Artificial intelligence also emerged as a key area, though most administrators and carriers are in early stages of engagement. TMPAA said this “suggests considerable potential for future integration”. “Many view AI as a future enabler of more innovative underwriting, faster decision-making, and improved customer service. The consensus is that the industry is only beginning to explore its full potential,” the report added. Market dynamics remain active, with 83% of program administrators and 88% of carriers reporting premium growth in 2024. Over half of administrators launched one to three new programs in the past two years, and 42% plan to launch two to three more within the next 24 months. However, the report noted that 84% of carriers have exited at least one program, primarily due to poor performance. Non-admitted programs now account for 53% of premiums, surpassing admitted business. TMPAA highlighted opportunities in deep specialisation and niche expertise, strong underwriting talent, speed-to-market agility and the increasing use of technology. These factors enable the sector to respond quickly to market demands and deliver tailored solutions. Despite the optimistic outlook, the report warned that the industry faces persistent challenges, including heavy dependence on capacity and reinsurance support, inconsistent underwriting discipline, fragmented data and technology infrastructure, along with intense competition. Talent shortages in underwriting, technology and leadership roles further complicate growth and operational resilience. Despite these issues, TMPAA said it believes the sector is well-positioned to capitalise on emerging opportunities through continued market expansion, deeper integration of AI and data analytics and increased specialisation. Strengthening carrier-administrator partnerships through better alignment and shared accountability is also critical for long-term success. Program administrators, insurers and service providers remain optimistic about the sector’s future, viewing it as a “bright spot in the insurance ecosystem”. This optimism is balanced by a growing awareness of the operational and structural challenges that accompany scale and complexity, TMPAA added.