Fronting carriers can still build on heady 43% growth in 2022: AM Best

Fronting companies can continue their growth drive in the US insurance economy, buoyed by a strong market of MGA providers and a focus on red hot excess & surplus lines, analysts at insurance sector ratings agency AM Best have indicated.

“AM Best believes that fronting companies will continue to grow,” analysts wrote, citing momentum from “growing interest from both MGAs and capital providers.”

Increasingly, market growth has focused on partnerships between “new, specialty commercial-focused” fronting carriers and reinsurers.

“The market is ripe with opportunities for companies offering hybrid fronting arrangements to demonstrate their value,” AM Best claims.

Comments follow a 43% gain in direct written premium handled by fronting companies within the AM Best ratings universe.

Some of that growth is mid double-digit as several established names chase the leader. Other cases show triple digit growth as upstarts seek the leaderboard: the seventh and ninth largest on the AM Best list weren’t writing business yet as of 2020.

The market’s #3 Trisura upped its top line by 64% in pursuit of the market’s #2 Clear Blue, itself up 36% year on year. That’s still only 50% of the sum posted by long-running leader State National.

Reinsurers, however, are “growing more selective” about both the business they write and the names they are ready to partner with. Not everybody squeezed through the January 1 hard market easily, AM Best noted.

That puts a premium on hybrid fronting models with fronting carriers willing to retain a portion of the risk, AM Best wrote of growth trends.

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