What is fronting? Business considerations POST 1 of 2
09-04-2015 | 09:40 AM
#1
Thread Starter
HP Marine Ins. Specialist
Joined: Mar 2008
Posts: 985
Likes: 0
From: Insuring any kind of boat
What is fronting? Business considerations POST 1 of 2
Some of you may wonder why I am posting something like this. The short and simple answer is because it potentially applies to you and your performance boat. This article should not be mistaken as me stating an opinion or that fronting is good/bad. I am not shedding an opinion. I've always been the insurance agent that believes that no one program or insurance product can fit everybody. I have risks that come across my desk DAILY where I do will refer out to another agent or even tell someone to keep what they have in place. At the end of the day, I can sleep, knowing that I did the best I could for that person and put their best interests before money.
Fronting is a very relevant topic as one of the programs in the industry is a fronted program. Again, not saying anything good/bad or indifferent but I see representatives posting comments about ethics and quite honestly, the ethical thing to do when selling someone an insurance policy is to FULLY disclose the program. PERIOD.
So, for those that want info on this topic, please read on. For those that it doesn't matter, then that is ok. I am simply stating facts as set forth in an article by a former reinsurance executive.
[I][I]I. Introduction
In general, fronting is the process by which a primary insurer cedes all or virtually all of the insurance risk of loss to a reinsurer who also controls the underwriting and/or claim handling process either directly or through a managing general agency. Often, the reinsurer is not licensed in the United States.
Fronting is a troublesome practice for both the industry and its regulators. It presents both business opportunities and problems for participants. Regulators have concerns about: (a) their ability to regulate those who are controlling business in their states; and (b) solvency issues when such programs go wrong. Some states attempt to regulate or prohibit this practice. A sub-class of case law is developing which would allow insureds to collect directly from reinsurers on fronting programs despite a lack of privity.
The purpose of this article is to examine fronting from the aspect of the industry and regulators and to comment on related legislation and regulations and case law.
II. Business Considerations
A. Arguments in Favor of Fronting
From a primary company standpoint, fronting is often a soft market strategy to provide income without significant insurance risk. This income may serve to pay for certain support staff when they are not fully utilized. It also can give the primary company a “free” look at new books of business.
Fronting can also be a means by which a primary company enters a new insurance field gradually with the considerable financial and technical support of a reinsurer. Fronting can also be a means by which a primary insurer can exit a field when regulatory requirements mandate that business be renewed for a certain period of time.
Historically at least, it has taken many years for a primary insurer to be licensed in all states. In the interim, fronting has been used to allow an insurer to write national programs. In addition, international insurers may choose not to be licensed in the United States but have clients with operations here which need insurance. Fronting can allow such insurers to retain their clients.
During the last ten years, reinsurers have sought to protect their source of income by dealing directly with insureds, their brokers or managing general agents who control books of business. When this is the case, the primary company may be the last part of the structure to be put in place, almost as an afterthought. This is sometimes referred to as “reverse flow” business. Since reinsurers usually anticipate very favorable results in these circumstances, a bare front may be preferred.
B. Business Problems with Fronting
Fronting programs have inherent pressures which make them difficult to maintain over time. To avoid adverse selection, the primary company is often precluded from writing the same class of business as is included in the fronting program. Even if adverse selection is not an issue, an insurer may have to file rates and forms for the fronted program and will be precluded from using different rates and forms for its own programs. Should the underwriting results of the fronting program be or seem to be profitable, the primary company may seek to keep some net insurance risk. The reinsurer is likely to by annoyed by such an opportunistic effort to profit from the reinsurer’s program.
Managing general agents often control underwriting and claim handling on fronting programs. Such entities are compensated by commissions rather than underwriting results. This means that they have a motivation to write marginal business and discount rates. Likewise, their claim handling resources may be thin and they have a motivation to under reserve to preserve their commission income. This presents the primary insurer with market conduct problems which cannot be passed off to the reinsurer.
Assuming an unlicenced reinsurer, the ceding company will need security for reported and unreported losses if it is to avoid a penalty to surplus. Loss data supplied by the managing general agent may be incomplete or of questionable quality making it hard for the primary company’s actuaries to project losses. Being who they are, actuaries will make conservative projections under such circumstances which, to nobody’s surprise, may be higher than those of the reinsurer. This may well precipitate a struggle both within the primary company and with the reinsurer, over the proper level of security.
If the reinsurer is placed in receivership, the primary company is in a very difficult financial as well as practical situation. Financially, the primary is faced with paying 100% of the losses with a very small percentage of the premium. If security is exceeded, the primary insurer may become one of many creditors in a bankruptcy proceeding in the reinsurer’s country of domicile. Practically, the primary insurer may have difficulty in securing the underwriting and claim files from the entity or entities chosen to perform these functions by the reinsurer. This will precipitate additional market conduct problems.
A reinsurer also can find itself in difficult circumstances should the front become insolvent. Absent a cut-through to the insureds, [1] an association captive reinsurer is obligated to pay reinsurance proceeds to the receiver who will use them for administrative expenses and then spread them among all creditors of the same class i.e. to creditors other than the association members.
“Reverse flow” programs may be organized by and focused through a entity which plays a controlling role in the transaction (i.e. intermediary, managing general agent, underwriting manager, broker, claim manager etc.) with the primary insurer in a completely passive role. If results are not what were expected, the reinsurers may fall out of love with the entity they chose to control the program and then criticize the front company for not being more vigorous in supervising this entity. This can jeopardize the front’s reinsurance protection on a program for which it never expected to have any net risk or operational responsibility.
III. Regulatory Concerns
Wariness with the fronting process by regulators goes back at least as far as the 1950's. [2] New York is the state which is most consistent in its animosity but the issue as arisen in many other states and at the National Association of Insurance Commissioners. [3]
Historically, the most commonly cited argument against fronting by regulators is that it aids and abets an unlicenced reinsurer in doing business within the state. Usually, this is a metaphorical argument since most states have very specific statutes concerning the activities of unauthorized reinsurers which constitute doing business in the state. Fronting, generally, does not violate these statutes. Nonetheless, there is legitimate concern that the entity which controls a primary insurance program within the state is beyond its jurisdiction.
The second major regulatory concern is one of solvency. Fronting transactions, by their very nature, are highly leveraged. Primary companies who engage in this practice may allow their policies to be issued on business far outside their expertise. Should the reinsurer be unwilling or unable to meet its obligations, the primary insurer may be brought down by its inability to handle the runoff as well as the necessary reduction to surplus. Regulatory concerns were echoed in a description of the insolvency of Transit Casualty in “Failed Promises: Insurance Company Insolvencies” issued by the House Subcommittee on Oversight and Investigations in 1990:
[Transit management and its] board simply ignored two fundamental flaws in their [fronting] plan. The first was Transit’s enormous credit risk that its reinsurers would be unable or unwilling to pay, and the second was that Transit was completely unprepared to handle the incredible volume of [fronting] business produced by the MGAs. [4]
One of the problems encountered by regulators in regulating fronting is in defining it. Some statutes and regulations have defined fronting in terms which are mushy at best and could apply to a surprisingly high percentage of all reinsurance transactions. This has hampered the ability to regulate these transactions. See Section IV, infra.
]
Fronting is a very relevant topic as one of the programs in the industry is a fronted program. Again, not saying anything good/bad or indifferent but I see representatives posting comments about ethics and quite honestly, the ethical thing to do when selling someone an insurance policy is to FULLY disclose the program. PERIOD.
So, for those that want info on this topic, please read on. For those that it doesn't matter, then that is ok. I am simply stating facts as set forth in an article by a former reinsurance executive.
[I][I]I. Introduction
In general, fronting is the process by which a primary insurer cedes all or virtually all of the insurance risk of loss to a reinsurer who also controls the underwriting and/or claim handling process either directly or through a managing general agency. Often, the reinsurer is not licensed in the United States.
Fronting is a troublesome practice for both the industry and its regulators. It presents both business opportunities and problems for participants. Regulators have concerns about: (a) their ability to regulate those who are controlling business in their states; and (b) solvency issues when such programs go wrong. Some states attempt to regulate or prohibit this practice. A sub-class of case law is developing which would allow insureds to collect directly from reinsurers on fronting programs despite a lack of privity.
The purpose of this article is to examine fronting from the aspect of the industry and regulators and to comment on related legislation and regulations and case law.
II. Business Considerations
A. Arguments in Favor of Fronting
From a primary company standpoint, fronting is often a soft market strategy to provide income without significant insurance risk. This income may serve to pay for certain support staff when they are not fully utilized. It also can give the primary company a “free” look at new books of business.
Fronting can also be a means by which a primary company enters a new insurance field gradually with the considerable financial and technical support of a reinsurer. Fronting can also be a means by which a primary insurer can exit a field when regulatory requirements mandate that business be renewed for a certain period of time.
Historically at least, it has taken many years for a primary insurer to be licensed in all states. In the interim, fronting has been used to allow an insurer to write national programs. In addition, international insurers may choose not to be licensed in the United States but have clients with operations here which need insurance. Fronting can allow such insurers to retain their clients.
During the last ten years, reinsurers have sought to protect their source of income by dealing directly with insureds, their brokers or managing general agents who control books of business. When this is the case, the primary company may be the last part of the structure to be put in place, almost as an afterthought. This is sometimes referred to as “reverse flow” business. Since reinsurers usually anticipate very favorable results in these circumstances, a bare front may be preferred.
B. Business Problems with Fronting
Fronting programs have inherent pressures which make them difficult to maintain over time. To avoid adverse selection, the primary company is often precluded from writing the same class of business as is included in the fronting program. Even if adverse selection is not an issue, an insurer may have to file rates and forms for the fronted program and will be precluded from using different rates and forms for its own programs. Should the underwriting results of the fronting program be or seem to be profitable, the primary company may seek to keep some net insurance risk. The reinsurer is likely to by annoyed by such an opportunistic effort to profit from the reinsurer’s program.
Managing general agents often control underwriting and claim handling on fronting programs. Such entities are compensated by commissions rather than underwriting results. This means that they have a motivation to write marginal business and discount rates. Likewise, their claim handling resources may be thin and they have a motivation to under reserve to preserve their commission income. This presents the primary insurer with market conduct problems which cannot be passed off to the reinsurer.
Assuming an unlicenced reinsurer, the ceding company will need security for reported and unreported losses if it is to avoid a penalty to surplus. Loss data supplied by the managing general agent may be incomplete or of questionable quality making it hard for the primary company’s actuaries to project losses. Being who they are, actuaries will make conservative projections under such circumstances which, to nobody’s surprise, may be higher than those of the reinsurer. This may well precipitate a struggle both within the primary company and with the reinsurer, over the proper level of security.
If the reinsurer is placed in receivership, the primary company is in a very difficult financial as well as practical situation. Financially, the primary is faced with paying 100% of the losses with a very small percentage of the premium. If security is exceeded, the primary insurer may become one of many creditors in a bankruptcy proceeding in the reinsurer’s country of domicile. Practically, the primary insurer may have difficulty in securing the underwriting and claim files from the entity or entities chosen to perform these functions by the reinsurer. This will precipitate additional market conduct problems.
A reinsurer also can find itself in difficult circumstances should the front become insolvent. Absent a cut-through to the insureds, [1] an association captive reinsurer is obligated to pay reinsurance proceeds to the receiver who will use them for administrative expenses and then spread them among all creditors of the same class i.e. to creditors other than the association members.
“Reverse flow” programs may be organized by and focused through a entity which plays a controlling role in the transaction (i.e. intermediary, managing general agent, underwriting manager, broker, claim manager etc.) with the primary insurer in a completely passive role. If results are not what were expected, the reinsurers may fall out of love with the entity they chose to control the program and then criticize the front company for not being more vigorous in supervising this entity. This can jeopardize the front’s reinsurance protection on a program for which it never expected to have any net risk or operational responsibility.
III. Regulatory Concerns
Wariness with the fronting process by regulators goes back at least as far as the 1950's. [2] New York is the state which is most consistent in its animosity but the issue as arisen in many other states and at the National Association of Insurance Commissioners. [3]
Historically, the most commonly cited argument against fronting by regulators is that it aids and abets an unlicenced reinsurer in doing business within the state. Usually, this is a metaphorical argument since most states have very specific statutes concerning the activities of unauthorized reinsurers which constitute doing business in the state. Fronting, generally, does not violate these statutes. Nonetheless, there is legitimate concern that the entity which controls a primary insurance program within the state is beyond its jurisdiction.
The second major regulatory concern is one of solvency. Fronting transactions, by their very nature, are highly leveraged. Primary companies who engage in this practice may allow their policies to be issued on business far outside their expertise. Should the reinsurer be unwilling or unable to meet its obligations, the primary insurer may be brought down by its inability to handle the runoff as well as the necessary reduction to surplus. Regulatory concerns were echoed in a description of the insolvency of Transit Casualty in “Failed Promises: Insurance Company Insolvencies” issued by the House Subcommittee on Oversight and Investigations in 1990:
[Transit management and its] board simply ignored two fundamental flaws in their [fronting] plan. The first was Transit’s enormous credit risk that its reinsurers would be unable or unwilling to pay, and the second was that Transit was completely unprepared to handle the incredible volume of [fronting] business produced by the MGAs. [4]
One of the problems encountered by regulators in regulating fronting is in defining it. Some statutes and regulations have defined fronting in terms which are mushy at best and could apply to a surprisingly high percentage of all reinsurance transactions. This has hampered the ability to regulate these transactions. See Section IV, infra.
]
Last edited by WakezoneINS; 09-04-2015 at 10:03 AM.
09-11-2015 | 11:02 AM
#3
Registered
Joined: Nov 2001
Posts: 10
Likes: 0
From: New York
Bravo on posting a 15 year old article that really deals with the Self Insured world and using a front company to bring an insurer that is licensed to those that live in the self insured world. As the captives and rent a captives of that era failed so did the usefulness of the opinion of this author. In today's market with the rebirth of a healthy captive segment this version of the fronting world does not exist, but you were probably not operating in the insurance world when this was written. Please also note that the author is going to be very happy to see you reproduced his copywrited article without permission.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
09-11-2015 | 11:50 AM
#4
Thread Starter
HP Marine Ins. Specialist
Joined: Mar 2008
Posts: 985
Likes: 0
From: Insuring any kind of boat
Bravo on posting a 15 year old article that really deals with the Self Insured world and using a front company to bring an insurer that is licensed to those that live in the self insured world. As the captives and rent a captives of that era failed so did the usefulness of the opinion of this author. In today's market with the rebirth of a healthy captive segment this version of the fronting world does not exist, but you were probably not operating in the insurance world when this was written. Please also note that the author is going to be very happy to see you reproduced his copywrited article without permission.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
Arthur, I refuse to get into a useless back and forth with you. Information is simply that, information and nothing more. All the above post was, was a way to inform the general public of BOTH the pros and cons of fronting. I am finding it difficult to locate in the article written by the author (not me) how this is taking sides one way or another. I felt the article offered good info to both sides of the coin. It was not meant to open up debate or create a situation/conflict.
Furthermore, I did not take any credit for the above, I referenced the fact that it was NOT my article.
09-11-2015 | 12:08 PM
#5
Registered
Joined: Nov 2001
Posts: 10
Likes: 0
From: New York
Why is discussion useless? Why post something that is outdated and then not want to discuss it? Stand by what you put up or don't put it up at all instead of hiding behind a line that "it is not my article".
09-14-2015 | 04:35 PM
#6
Registered
Joined: Aug 2004
Posts: 324
Likes: 0
From: AZ
Bravo on posting a 15 year old article that really deals with the Self Insured world and using a front company to bring an insurer that is licensed to those that live in the self insured world. As the captives and rent a captives of that era failed so did the usefulness of the opinion of this author. In today's market with the rebirth of a healthy captive segment this version of the fronting world does not exist, but you were probably not operating in the insurance world when this was written. Please also note that the author is going to be very happy to see you reproduced his copywrited article without permission.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
09-14-2015 | 05:46 PM
#7
Registered
Joined: Dec 2013
Posts: 903
Likes: 1
From: East Texas Waterfront- running errands if anyone asks
Bravo on posting a 15 year old article that really deals with the Self Insured world and using a front company to bring an insurer that is licensed to those that live in the self insured world. As the captives and rent a captives of that era failed so did the usefulness of the opinion of this author. In today's market with the rebirth of a healthy captive segment this version of the fronting world does not exist, but you were probably not operating in the insurance world when this was written. Please also note that the author is going to be very happy to see you reproduced his copywrited article without permission.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
The modern fronting world does not live amongst the smoke and mirrors that this article and most of your public service announcements allege. The Total Dollar Full Throttle Insurance program is written on an A rated ADMITTED Policy Form reinsured by Lloyd's of London. Our reinsurer is neither fly by night nor unlicensed to operate in the US, so that is not the reason we chose to go that route when we put the program together, in fact their parent is the largest insurer in the world. This does not matter nor does the fact that 100% of all insurers reinsure themselves, maybe you should publish an article that this is also bad.
We chose to go the admitted route with the State National Group so as to offer protections to our clients from the various state insurance departments that oversee admitted carriers. We access the non admitted market on certain programs but only in scenarios where the admitted market does not provide proper programs, as a licensed insurance professional you should know this is the LAW. State National is an admitted insurance carrier operating in all 50 states and recently increased its surplus, which in layman's terms means they are bigger and healthier than ever. Should by chance they fail, unlike a carrier in the non admitted market failing, the protections of the various state guarantee funds would step in to make sure all claims are paid.
While we are on the topic of public service announcements, lets do a comparison of Occurrence vs. Claims Made. We are an occurrence based form. What this means is that when the claims occurs, the claim is filed under the policy that was in force at the time of the claim. On the claims made form, which we do not write, the claim would be filed under the policy that is currently in force. You may ask yourself what if I sold my boat and have cancelled the policy and receive a claim after I cancel? Under the claims made form you are required to buy what is called an extended reporting period or tail which will allow claims to be reported after the original policy expires. Failure to buy this tail leaves you open to claims that will not be covered by the policy upon cancellation of coverage. TAILS ARE NOT FREE and is an added cost to that product. So when doing a side by side comparison of claims made vs. occurrence, one needs to factor in that claims made has an additional cost at the end to properly protect yourself, while an occurrence form this is automatic. In comparing pricing, the claims made form should be cheaper to allow for the purchasing of the tail at the end when doing a cost analysis. A good insurance professional would disclose this to their clients when selling this form.
By the way, a good insurance professional would also want to proof read the company name in his contact signature.
Arthur H Buhr III
Total Dollar Yacht Insurnace
Full Throttle Insurance Program
[email protected]
516-833-1566-direct
917-478-5308-cell
www.totaldollar.com
You are welcome, Arthur...
