The insurance fronting model is rapidly maturing, moving beyond a race for scale to a focus on operational excellence, according to a recent report by Conning.
This shift comes amid significant growth, increasing challenges, and a market shakeout within one of the property-casualty insurance industry’s fastest growing sectors.
The report, Fronting Model Is Here to Stay … With Some Changes, offers a comprehensive analysis of the evolving role of fronting companies, their role in MGA distribution, and their growing importance to reinsurers.
“The fronting model is no longer in its infancy—it’s maturing rapidly and adapting to a more complex and competitive environment,” said Alan Dobbins, Director at Conning. “In 2024, gross premiums written by fronting companies grew by 26%, reaching $19.6 billion. But despite this growth many companies remain concentrated by line of business, customer and reinsurance support, and the market is beginning to stratify.”
According to the study, fronted premiums now represent over 20% of total MGA-produced premiums and nearly 11% of the E&S market.
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The study also found that, despite adverse loss development impacting the sector, the direct loss ratio for the fronting universe improved slightly in 2024. Conversely, the direct expense ratio rose, signalling rising operational costs.
Reinsurer panels are also undergoing changes, the report also noted, with collateralized markets gaining share and certain traditional markets reducing their exposure to fronting.
Other highlights include a slight premium retention decline in 2024, contrary to expectations, and leverage increased as companies scaled up, as well as the impact of discontinued business, an increasing challenge affecting growth and profitability trajectories, disclosed by several fronts.
“The fronting market is transitioning from a race for scale to a race for operational excellence,” Dobbins added. “As MGAs become more discerning and reinsurers demand more rigor, fronting companies must invest in infrastructure, governance, and underwriting discipline to remain competitive.”
The report also explores structural challenges facing the sector, including difficulties in differentiation and limited exit options risks for PE-backed fronts.
“Despite these hurdles, Conning sees a path forward for fronting companies that can demonstrate sustainable profitability and operational maturity,” the firm concluded.
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