Head-to-head: fronting insurers vs traditional insurers

In an animated debate at the MGAA Conference on July 10th, expertly moderated by Mark Cliff at Avid Insurance, representatives from Bridgehaven, Gallagher Re, AXA and Rokstone argued the pros and cons of fronting vs traditional insurers.

For context, the US fronting space has experienced enormous growth in recent years and now entrants such as Bridgehaven, Hadron, Accelerant and Accredited are taking the UK market by storm. But what is the fronting model and how is it taking advantage of the opportunities in the MGA market?

As Paul Jewell, CEO of Bridgehaven, succinctly put “it’s insurance that acts on behalf of reinsurers”.  In essence the model provides reinsurance with access to the booming MGA market, enabling them to grow organically. To demonstrate the scale of the market, Insuramore, an insurance consultancy, reported that “over USD200 billion in premiums across all classes are likely to have been written by MGAs in 2023”1.

To open the debate, Jewell emphasised how a fronter can attract capacity from all over the world without encountering any jurisdictional restrictions. It also enables diversification across all classes of business.

 Martyn Glover, Partner at Gallagher Re, supported this, saying that a fronter can “certainly compete with the more traditional insurer”. He argued that they can be more agile, their speed of doing business is much faster and that there is no channel conflict.

Ian Anson, Group Managing Director, Rokstone, explained that from his perspective as an MGA, there were clear benefits to both models but in reality he was “agnostic”. The important thing was the longevity of the carrier relationship throughout the cycle.

David Ovenden, CUO at AXA Commercial highlighted the importance of a long-term relationship and how a big balance sheet business like AXA can weather volatility. He explained how, during COVID, they had the ability to absorb the losses and support the schemes throughout. He went on to argue that a traditional insurer can address the so-called channel conflicts by looking for business that brings new products or a new route to market.  However, above all, the alignment of interest with the MGA is a “critical piece”.

In response to a question posed by Mark Cliff, on whether traditional insurers “blow hot and cold”, Martyn Glover said that MGAs couldn’t be worrying about the future coverholder renewal from day one. Like the other panellists he also stressed how the endurance of capacity is key.

A final discussion centred on people and the importance of both fronters and traditional insurers embracing the new ideas that talent are bringing to the table. David Ovenden urged businesses, where possible, to ramp up their investment to attract talent.

Overall, the debate clearly highlighted that both fronting and traditional insurance models have their place in the UK and ROI MGA market. Evidently, the choice between the two will depend on the business drivers of individual MGAs and what they are looking for from a long-term insurer partnership.

1 https://www.insuramore.com/wp-content/uploads/press_release_global_insurance_mga-mgu.pdf

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