Our CEO Hugh O’Donnell, Chief Broker, Neil Hitchcock and Business Development Manager, Kurt Bounds, offer their insights and experiences on the rapid evolution of hybrid fronting models in a recent article for Insurance Business.
What is Hybrid Fronting?
Traditionally, fronting insurers simply provided their licenses and paperwork, taking on little to no risk. Hybrid fronting flips this model on its head. Now, fronting companies take a significant share of the risk, becoming more like traditional insurance companies themselves.
Why the Rise in Hybrid Fronting?
Several factors are driving the growth of hybrid fronting models:
Increased Risk Sharing: Fronting companies are now expected to take on 20-25% of the risk, requiring more capital and underwriting expertise.
Shifting Risk Landscape: MGAs and reinsurers are demanding more from fronting companies, including assuming credit risk and tail risk (potential for losses exceeding reinsurance limits).
Rise of Insurtech: The data-driven approach of Insurtech companies is fuelling the growth of smaller hybrid fronting models.
“We’ve moved to the world of hybrid fronting because we’ve so many MGAs, and part of that move has been that the MGAs themselves are being required to take on a lot more risk”.
– Hugh O’Donnell, CEO
Interested to Know More?
