Insurance
Home›Insurance›Reinsurance›AM Best warns unrated reinsurers add risk to US fronti…
AM Best warns unrated reinsurers add risk to US fronting market
AM Best estimates that upwards of $30 billion in 2025 premium will be generated through fronting arrangements, exposing fronting carriers to counterparty payment risk if backing fails.
AM Best warns that the US property and casualty fronting market is relying more on reinsurance that can be less reliable, raising credit and counterparty risk for the admitted, licensed carriers doing the fronting, according to its special report titled "Front" and Center: A Review of the Property/Casualty Fronting Market. The report estimates that upwards of $30 billion in premium was generated through fronting arrangements in 2025. In fronting deals, a licensed insurer issues coverage and passes most or all of the underlying risk to a reinsurer, but AM Best says more of that backing now comes from offshore entities, unauthorized captives, or unrated carriers that might not be able to access the business under their own rating.
AM Best highlights the downside for fronting carriers if a reinsurer fails to pay, noting that the fronting insurer must still honor the policy obligations. The report also links fronting market expansion to the growth of managing general agents, saying MGAs generate $108.7 billion of US P/C premium, about 10% of the overall market, and that fronting has been a key mechanism supporting MGA programs.
AM Best flags that the growing pool of premium supported by these riskier reinsurance structures leaves an estimated $30 billion exposed to reinurer payment risk.