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Unrated reinsurers raise credit risk in US P&C fronting
AM Best estimated that by year-end 2025, upwards of $30 billion of U.S. P&C premiums are fronted, with additional risk tied to unrated and unauthorized reinsurers.
AM Best has warned that additional credit risk is spreading into the U.S. property and casualty fronting segment through the use of unrated and unauthorized reinsurers, even as fronting arrangements continued to expand during 2025.
In fronting arrangements, a licensed insurer issues the policy to meet regulatory requirements for an unlicensed entity, and AM Best said the practice historically served mainly captives and self-insured organizations before expanding to a broader range of participants including managing general agents.
AM Best said fronting returned strongly over the past decade amid hard market conditions and growth in MGA-originated business, and it estimated that as of year-end 2025, upwards of $30 billion of U.S. P&C insurance industry premium is fronted.
The rating agency also pointed to market interest in fronting as MGAs seek the structure, while the involvement of unrated and unauthorized reinsurers increases the segment’s credit exposure, according to the report.