If you’re here, it’s likely for one of two reasons: You have clients looking at captive insurance, or you’re growing your captive practice and want to make sure you’re recommending the right carrier options. If you’re wondering which fronting carriers work the best with captive insurers, you’re not alone.
Fronts play a role in reinsurance, compliance, financial strength, licensing, and overall captive success. Knowing this information will make you look better in the eyes of your clients and make them feel better about their decision to join a captive.
Captive Coalition specializes in the captive market, helping independent agents understand captives and fronting carriers. We want you to understand how fronts are important with captives so you can better help your clients and book of business.
This article will give you the tip criteria for selecting a fronting carrier and which companies stand out. That way, you can confidently help your clients toward the best option for their captive strategy.
Not all fronting carriers are created equal. Some have decades of experience with captives, while others are relatively new. Some provide broad flexibility, while others focus on specific structures. These are five factors to consider when evaluating fronting carriers:
A.M. Best is the gold standard for assessing the financial strength of insurance companies. This rating evaluates an insurer’s ability to meet its financial commitments.
An A.M. Best rating answers two questions:
A strong A.M. Best rating ensures that the fronting carrier won’t become a financial liability for your client’s captive.
A fronting carrier takes on a credit risk when working with a captive. This means they’re responsible for paying claims if the captive cannot. Their financial strength determines how well they can absorb risk and support captives in the long term.
All of the top fronting carriers also have retail distribution for traditional insurance products. Evaluating their overall business health gives a better understanding of how well they can support captives.
This guide provided by A.M. Best below shows the categories these insurance companies would fall under in Roman Numerals, indicating their capital and surplus. The higher the Roman Numeral, the higher the capital and surplus.
One of the biggest benefits of a fronting carrier is that captives don’t have to go through the costly and time-consuming process of getting licensed in each state they operate in. A fronting carrier licensed in all 50 states allows captives to focus on risk management instead of regulatory hurdles.
For example, if a roofing business in South Carolina joins a group captive, they don’t need to worry about the captive getting licensed in other states where their business operates. The fronting carrier handles that.
Captives operate differently from traditional insurers. Not every fronting carrier may understand all of the nuances (you would hope they would). Years of experience with captives indicate how well a front can adapt to various captive structures.
An experienced fronting carrier is more likely to:
Not all fronting carriers offer the same services. Some focus on single-parent captives, others specialize in group captives, and others give services to cell captive models. Agents need to align the front to their clients’ needs.
For example, if your client is planning to form a single-parent captive, a fronting carrier that primarily works with group captives might not be a good fit.
These carriers consistently rank as the best options based on financial strength, experience, and service offerings. They are not ranked from worst to best. They are ranked alphabetically.
A.M. Best Rating: A+ (Superior)
Financial Strength: XV (Over $2 billion in capital and surplus)
Licensed in all 50 States: Yes, plus over 200 countries and jurisdictions.
Years of Experience Fronting Captives: 50+ years
Services:
With decades of captive experience and global reach, AIG is a strong choice for clients with multi-state or international operations.
For an overview of their exact services, look at AIG’s captive management services page. Also, read their captive solutions for a rundown on their fronting carrier services.
A.M. Best Rating: A+ (Superior)
Financial Strength: XV (Over $2 billion in capital and surplus)
Licensed in all 50 States: Yes, including Washington D.C.
Years of Experience Fronting Captives: 30+ years
Services:
Arch’s expertise in group captives makes them a great option got clients looking to share risk while maintaining control.
Check out Arch Insurance’s Alternate Markets page to get a better view of what they provide regarding captives.
A.M. Best Rating: A+ (Superior)
Financial Strength: XV (Over $2 billion in capital and surplus)
Licensed in all 50 States: Yes
Years of Experience Fronting Captives: 50+ years
Services:
Known for their strong track record in casualty insurance, they are a solid option for captives focusing on liability and workers’ comp.
Take a look at Great American’s Alternative Markets page to see if their services are right for your client's needs.
A.M. Best Rating: A+ (Superior)
Financial Strength: XV (Over $2 billion in capital and surplus)
Licensed in all 50 States: Yes, plus three U.S. territories and all 10 Canadian provinces.
Years of Experience Fronting Captives: 70+ years
Services:
Their extensive history and experience with diverse models make them a reliable long-term partner.
Read Old Republic’s captive reinsurance page to see if its products and services fit your client's needs.
A.M. Best Rating: A+ (Superior)
Financial Strength: XV (Over $2 billion in capital and surplus)
Licensed in all 50 States: Yes, plus Washington D.C., and several U.S. territories.
Years of Experience Fronting Captives: 30+ years
Services:
Their expertise in managing large group captive programs makes them a great fit for clients looking for an established, scalable solution.
To understand captives and what Zurich North America offers, check out their captive insurance page to learn about their services.
Knowing fronting carriers that can fulfill the needs of your clients' captives isn’t always easy, especially with the number of fronts and their services. The better you understand these carriers, the better you will be in guiding your best clients with captives. Whether your client is forming a captive or joining a group captive, knowing they work with a reliable fronting carrier can make all the difference in the world.
Up next, learn about how captive insurance controls losses. That way you know what captives do before a fronting carrier can get involved with claims.
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