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Pulse Survey Analysis: Drilling Deeper On Fronting Relationships

 In partnership with, Towers Watson conducted this pulse survey to take a look at the issues involved in reinsuring your captive.

This analysis was written by analysts at Towers Watson.

The October Pulse Survey, which queried the value of fronting services, elicited 47 responses. Respondents were offered five degrees of value, with responses ranging from “no value,” “some value,” “real value,” “great value” to “of utmost value.” We also wanted to learn what questions were asked of fronting carriers, whether they had manuscripted policies, and who drafted those policies.

Here is what the respondents valued, from the most to the least:



Response average range:

1 (least) to 5 (most)

Most chosen response

Percentage of most chosen response


Financial strength of front


Great value



Collateral demanded


Great value



Flexibility when business plans change


Great value



Flexibility in bundling/unbundling claims


Great value



Price for services


Great value



Willingness to accept manuscripted policies


Great value



Flexibility in bundling/unbundling reinsurance


Some value



Ability to handle emerging risk transfer rules


Great value



Allowing own claim audits independent of fronting companies


Some value



Being available as a surrogate advisor


Some value



We were a bit surprised by some of the results. Pricing, which always seems to be a primary concern, is ranked just fifth in value. (In hindsight, maybe we should have asked about the “importance” versus the “value” of fronting services -- results may have changed based on the interpretation.) We suspect it reflects the fact that prices are considered tolerable, so pricing ranks lower than the four other categories. Yet it is the second most frequently asked question of fronters when soliciting services, being asked by 87% of the respondents; hence, price is important, but not a problem in respect to its value.

We were also surprised (but not disappointed) that the financial strength of the front was the top priority, especially as this ranked just fourth on questions asked of the front when choosing services. In fact, 23% of captives never asked this question when first choosing a front.

As important as how much collateral is demanded was to respondents (it ranked second in valued services and was asked by everyone when soliciting services), there was less attention paid to how collateral was calculated in later years, as 19% did not explore this issue up front. “Stacking” is a major issue for many captives, which is the compilation of several years of collateral demands on open claim years.

There was consistency in the value of services and what questions were asked of the front in the areas of wanting bundled versus unbundled claim services and having less interest in separating reinsurance services from the front.

For claims, there was less interest in having the ability to conduct independent claim audits versus relying just on the fronting carriers’ audits. Our concern here is that many captive owners may be better off conducting their own audits, independent of the front, to have better control over audits’ focus and depth of review.

A willingness to accept manuscripted policies was ranked nearly as important as price for services. However, just 55.8% actually have manuscript policies. A possible concern is who drafted those policies. In our October article in Captive Insurance Company Reports, “Drilling Deeper on Fronting Relationships,” Carol Frey was concerned about the poor fit between manuscripted policies and standard insurance practices, which could lead to claim coverage problems. Of the 24 respondents to this question, 54.2% said they used their brokers; 16.7%, the captive manager; 33.3%, internal counsel; and 12.5%, the risk manager. Multiple responses were acceptable. Of the 33.3% that used others, just one (2.1%) used an outside attorney and four (8.5%) used the insurer. Ms. Frey recommended using an outside attorney familiar with insurance coverages.


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