A recent report by AM Best reveals that the US property and casualty insurance market has seen a substantial increase in fronting arrangements, with premiums surpassing $30 billion in 2025. This growth is attributed to the rising role of unrated or unlicensed reinsurers in supporting this activity. The report warns that this growth adds credit risks to the market, particularly when insurance companies rely on external or unrated reinsurers to cover most of the risks.
The concept of fronting refers to an insurance arrangement where a licensed insurance company issues a policy to a client and then transfers most or all of the risk to a reinsurer. This model allows other entities, such as managing general agents (MGAs), to access insurance capacity and issue policies in markets or sectors where they may not have a direct license to operate. Historically, this model was associated with companies that self-insure, but it has expanded significantly in recent years with the growth of MGAs.
According to data analyzed by AM Best, MGAs currently manage around $108.7 billion in insurance premiums, accounting for approximately 10% of the US property and casualty insurance market. The volume of direct premiums written by fronting companies has increased from around $1.8 billion in 2015 to nearly $20 billion in 2025, with double-digit annual growth rates during this period.
Reinsurers are now demanding that fronting companies retain a larger share of risks rather than transferring most of them to external reinsurers. This shift aims to align the interests of fronting companies and reinsurers, promoting more discipline in risk selection, underwriting, and claims management. This is particularly important in specialized programs managed by MGAs, where reinsurers need to ensure that underwriting and claims decisions prioritize portfolio profitability.
AM Best warns that fronting companies remain responsible to policyholders for fulfilling insurance obligations, even if the reinsurer fails to meet its commitments. As a result, the risk extends beyond the quality of the insurance portfolio to the creditworthiness of the counterparty and its ability to pay claims and reinsurance. Some fronting arrangements rely on external or unlicensed reinsurers, or low-rated entities, which increases the importance of credit risk management and due diligence on counterparties.
Despite the significant growth in the fronting sector, AM Best expects the growth rate to slow in the coming period, as the growth of the surplus lines insurance market moderates, particularly in property risks. The agency monitors 16 rated institutions from AM Best out of around 30 institutions operating in the fronting sector within the US property and casualty insurance market.
The fronting market's growth has significant implications for the insurance industry, particularly in terms of risk management and credit risk assessment. As the market continues to evolve, insurers, reinsurers, and regulators must work together to ensure that fronting arrangements are conducted in a responsible and sustainable manner.
Key points
- The US property and casualty insurance market has seen a significant increase in fronting arrangements, with premiums exceeding $30 billion in 2025.
- Reinsurers are demanding that fronting companies retain a larger share of risks to align interests and promote more discipline in risk selection and underwriting.
- AM Best expects the growth rate of the fronting sector to slow in the coming period as the surplus lines insurance market moderates.
