Captive Insurance Fronting Costs Decline

Captive insurance companies continue to be a strong and important part of the insurance business.  In order to be on an equal footing with insurance products from traditional insurers, group captives often reinsure insurance business from large primary insurers called fronting companies.  As noted in Business Insurance (see here), a recent study by the Captive Insurance Companies Association (see here) has indicated that the cost of fronting arrangements may be declining slightly.  Some key findings:

• The majority of captives pay fronting fees of 5% or less
• Access to admitted paper is the primary reason for the use of fronting
• AIG is the most common fronting insurer
• 24% reported a decline in the cost of fronting services, while 19% reported an increase

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Comments

[Martina]

Captive insurance companies continue to be a strong and important part of the insurance business.