Conning Report: As Market for Fronting Companies Grows, So Does Complexity

Fronting Companies Enjoy Strong Reinsurance Support; MGA Growth Also a Key Driver

HARTFORD, Conn., Aug. 13, 2024 /PRNewswire/ -- The fronting market continued its explosive growth trajectory in 2023 and into 2024, but it is also experiencing greater complexity, according to a new report by Conning.

"Between dependence on reinsurance, reliance on multiple third parties, a shift to greater premium retention, and a need for more capital, the business has become more complex to manage and analyze," said Steven Webersen, a managing director in Conning's Insurance Research unit and author of "Fronting Sector: More Complex than Meets the Eye."

Webersen noted that fronting companies are maturing – growing into their capital bases and showing improved earnings. However, leverage also is increasing, and many companies still maintain high concentrations among customers and reinsurance partners. The report looks at reinsurance usage and key business partners for each company and explains that the fronting companies enjoy strong reinsurance support and likewise are growing in importance for reinsurers. 

Mergers and acquisition activity among fronting companies appears to be on hold, according to Webersen, suggesting a valuation gap between buyers and sellers as well as a heightened diligence bar.

"So far, front companies have been able to grow almost as fast as they want or can," explained Webersen. "Growth in the underlying MGA market is cited as a key driver. However, we believe the proliferation of the fronting market has been a contributor to MGA growth. That will not always be the case, and when growth slows is when we will begin to see consolidation."

The Conning report analyzes key trends over the past year and provides implications for the future of this market.  

This report is available for purchase from Conning by calling (888) 707-1177 or visiting here.

ABOUT CONNING

With a long history of serving the insurance industry, Conning (www.conning.com) supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America. Conning is part of the Generali Investments platform, which has approximately $740B in assets under management.

Media Contacts

Insurance Research Team
Conning
888-707-1177

[email protected]

[C:COD00000328]

SOURCE Conning