2010 Fronting Survey Report

Since 2001, CICA has annually conducted an industry survey to gauge the fronting/risk-sharing market. This survey, done in conjunction with a number of prominent domicile associations, has provided valuable insight into the use of fronting. In addition to concentrating on fronting issues, the scope of the survey has been expanded in recent years to include reinsurance issues, employee benefits in captives, and comparative financial information about captives. The 2010 Fronting Survey Report results will be revealed at the CICA 2010 International Conference.

2009 Fronting Survey Report

Comprehensive Information,
Updated Annually
Since 2001, CICA has annually conducted an industry survey to gauge the fronting/risk-sharing market. This survey, done in conjunction with a number of prominent domicile associations, has provided valuable insight into the use of fronting.

In addition to concentrating on fronting issues, the scope of the survey has been expanded in recent years to include reinsurance issues, employee benefits in captives, and comparative financial information about captives.
 
New!
Nonmembers are now able to purchase this 64-page comprehensive Fronting Survey Report in .pdf format. Order your copy today!

FULL ACCESS FOR MEMBERS
CICA members have access to download the full survey results. Log-in

Take a look at these highlights from the 2009 Survey Report

Fronting:
	55% of respondents reported fronting costs as 5% or less of annual premium, compared to 59% last year. 21% reported fronting costs as 6-10% of annual premium, 15% as more than 20% of annual premium and only 4% reported fronting costs as 11-15% of annual premium.
	97% 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 40%. 83% of respondents rated the overall level of importance that fronting represents to their captive as either “very important” or “important.”
	Respondents reported using the following fronting carriers: AIG – 42% ACE- 27% Discover Re, Liberty Mutual, Old Republic, PMA, St. Paul/Travelers, Zurich – 11.5% (for each carrier) All other fronting carriers were cited by less than 10% of respondents, but many respondents used more than one fronting carrier.
	69% of respondents characterized the price of fronting as “reasonable,” with the 26% characterizing the price as “expensive” and 6% as “inexpensive.”
	56% of respondents reported no change in the cost of fronting from the prior year, while 24% reported a increase in costs most of which was less than a 5% increase. 21% reported a decrease in costs.
	In response to a question about the kind of collateral required (with 83% of respondents reporting that collateral was required), letters of credit were named by 72% of respondents, with trust accounts named by 55%, and cash by 17% of respondents.
Reinsurance:
	Excess of loss reinsurance is the most common reinsurance structure purchased by the survey respondents, with 38% of them purchasing it from reinsurance companies and 25% from fronting carriers.
	73% of respondents reported that they considered the price/value relationship of their reinsurance to be reasonable, compared to 85% in 2008.
	40% of respondents reported that their reinsurance costs are the same as the prior year, with 30% reporting a decrease and 30% reporting an increase.
Biggest Challenge About Owning a Captive:
	The 2009 Survey respondent did not report any one "hot" challenge, but rather a plethora of concerns. Collateral ranked number one at 21% followed closely by Expanded Utilization at 18%. Two things are certain: 1) Challenges are constantly changing and 2) there will always be challenges to owing a captive.

CICA’s next Fronting Survey Report will occur in late 2009. To be involved with the next fronting survey, become a CICA member or contact CICA.

Domicile associations are encouraged to get their members involved in this valuable survey. For more information, contact CICA.