Fronting Growth Brings Added Credit Risk to P&C Market

Fronting arrangements continued to expand in the US property and casualty (P&C) insurance market in 2025, but the involvement of unrated and unauthorized reinsurers is introducing additional credit risk, according to a new AM Best report.

Market estimates indicate that more than $30 billion in premium was generated through fronting arrangements in 2025, according to the Best's Special Report, "Front" and Center—A Review of the Property/Casualty Fronting Market. Under these arrangements, an admitted and licensed insurer transfers most or all of a transaction's risk to a reinsurer.

The reinsuring entity may be an offshore or unauthorized reinsurer, a captive insurer, or an unrated or low-rated US insurer. A reinsurer whose credit rating puts it at a competitive disadvantage can use a higher-rated fronting insurer to access its targeted business.

"It is critical to note that the fronting company assumes the counterparty credit risk since it would be required to honor the obligations imposed by the policy if the cedent fails to indemnify it," David Blades, associate director at AM Best, said.

Fronted premium has increased significantly over the past decade, driven by higher pricing conditions and growth in business originating from managing general agents (MGAs). AM Best's analysis of data compiled by the National Association of Insurance Commissioners found that MGAs generate $108.7 billion in insurance premium, representing approximately 10 percent of the overall P&C market.

Fronting arrangements can allow MGAs to launch programs more quickly and operate with greater autonomy than they could when working with traditional insurers. Over the past 10 years, fronting specialists' direct written premium has increased from approximately $1.8 billion to nearly $20 billion. The segment recorded double-digit growth each year from 2015 through 2025.

Reinsurers also have been requiring fronting companies to retain more risk to better align their interests, according to AM Best. The practice is particularly relevant to MGAs operating specialized programs, where reinsurers may seek greater participation from the fronting insurer in the underlying risk.

"By requiring higher retentions, reinsurers are striving to ensure underwriting discipline as fronting companies execute risk selection decisions," Greg Williams, managing director at AM Best, said.

An estimated 30 organizations in the P&C industry have fronting operations. AM Best's report focuses on 16 AM Best-rated organizations whose primary operation is fronting and examines their financial data and net retention by line of business.

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