What is fronting in insurance

What is the purpose of fronting?

Fronting — the use of a licensed, admitted insurer to issue an insurance policy on behalf of a self-insured organization or captive insurer without the intention of transferring any of the risk. The risk of loss is retained by the self-insured or captive insurer with an indemnity or reinsurance agreement.

What is a fronting fee?

In the context of syndicated credit facilities, the fee payable by the borrower to the fronting bank for the credit risk the fronting bank takes on the syndicate lenders counter-indemnifying it pro-rata to their participation in the relevant facility should it have to pay out under a letter of credit, bond or guarantee ...

What is a front policy?

What Are Fronting Policies? A fronting policy is a risk management technique in which an insurer underwrites a policy to cover a specific risk, but then cedes the risk to a reinsurer. Fronting policies, which are a type of alternative risk transfer (ART), are most commonly used by large organizations.

What is a fronted deductible?

The insurer will typically front the deductible, paying the claimant in full, then bill the insured for reimbursement of the deductible amount. If the insured cannot pay/reimburse the deductible, the claimant is still made whole by the insurer.