CICA publishes fronting survey
–16 April 2008
CICA published the results of its eighth annual fronting survey at its conference in Scottsdale, AZ, revealing that 59% of respondents reported fronting costs as 5% or less of annual premium, compared to 44% last year. 26% reported fronting costs as 6-10% of annual premium, and only 2% reported fronting costs as 11-15% of annual premium.
92% of respondents listed admitted paper as one of their primary reasons for using a fronting carrier, with regulatory compliance as the next highest reason at 51%. 86% of respondents rated the overall level of importance that fronting represents to their captive as either very important or important.
41 percent of respondents reported using AIG as fronting carriers, 18 percent reported using Old republic, 15 percent Zurich and 12 percent ACE. None of the remainder accounted for as much as 10 percent of respondents.
64% of respondents characterised the price of fronting as reasonable, with the remainder split almost evenly between expensive and inexpensive.
85% of respondents reported that they considered the price/value relationship of their reinsurance to be reasonable.
44% of respondents reported that their reinsurance costs are the same as the prior year, with 46% reporting a decrease. Only 10% of respondents reported an increase.
While fronting and reinsurance have dropped significantly as challenges to owning a captive, service concerns grew dramatically from approximately 12% on last year’s survey to 36% in 2008. Other challenges listed were 22% for tax concerns, 13% for reinsurance, and 9% for fronting.
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