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What is fronting?

Fronting is the process in which an insurance company issues a policy to its customer through an insurance company authorized to operate in that country in order to provide coverage in a country that does not have an operating license.

There are three parties in the fronting relationship: the insured, the insurance company and the frontier company. Frontier company is the company that issues the policy to fulfill the legally required formality. However, it transfers most or all of the risk to the main insurance company through reinsurance , does not hold any or very little risk on itself. In return, he receives a commission from the insurance company. This commission covers the frontier company's transaction costs and includes a profit margin.

The incurred damages are covered by the insurance company at the rate of risk it assumes. Another difference of fronting from classical reinsurance transactions is that the insured is actually the customer of the insurance company in the position of reinsurer, and the frontier company is engaged only because of a formality.

Insurance companies and multiple agencies benefit from the "Fronting" module on the portal.


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