What are ‘fronting’ and ‘hybrid fronting’? How do they differ? And what unique opportunities can these solutions afford MGAs and the wider UK insurance market? In this episode of Changing the Conversation, we are thrilled to be speaking with Paul Jewell, CEO of Bridgehaven Insurance, the first hybrid ‘fronter’ in the UK. At the forefront of this alternative distribution solution’s introduction to the UK market, Paul is well-placed to discuss the disrupting influence of fronting, having already made a sizeable impact across the pond in the US. He elucidates why fronting presents such a powerfully unique and profitable option to MGAs, and its benefits to the wider market.   Quote of the Episode “Simplistically, [fronting] is just a term for capacity or an insurance solution… An insurance company acts on behalf of somebody else, usually a single, or multiple reinsurers. it’s very common for international companies, [such as] Pepsi Cola, a US-based company who may want an insurance solution in the UK, but they may have their own insurance solution provided by a US company. So, what they do is they have a ‘fronting partner’, a ‘fronter’, in the UK that ‘fronts’ for that business, i.e., issues the insurance policy, and they reinsure back to the US under the master agreement. That’s traditional fronting. It’s most common for multinationals and those types of organisations.” Fronting is a hugely beneficial market solution, enabling multinationals to streamline their insurance provisions to ensure a continuity of cover across the various markets they operate in. Equally, this presents a big opportunity for those insurers, namely MGAs in the UK, who can provide this solution, as it grants them access to unique capacity derived from alternative markets they wouldn’t otherwise have operated within.   Key Takeaways Hybrid Fronting slightly differs from the traditional approach outlined above. In contrast to the Pepsi example, in which the fronting company would reinsure 100% back to the US, a hybrid fronter would retain a variable amount of that risk themselves. Thus, through this model, the insurance company issuing the policy retains risk to their balance sheet. Furthermore, the hybrid fronting model is more focused on underwriting profit. Fronting for Pepsi and issuing a policy to reflect their US-based cover is a matter of compliance, as you’re not allowed to issue American policies in the UK. Meanwhile, a hybrid fronter retains some amount of that risk, so premiums and claims stay in the UK with that insurance company. Thus, hybrid fronters can benefit from hugely diversified portfolios, and a focus on profitability through partnership with a broad range of reinsurers. Paul anticipates that fronting and hybrid fronting will become an increasingly powerful disruptor in the UK market. He argues that MGAs are particularly well-suited to operate in and benefit from this space by providing unique services and distribution in a more flexible and agile manner to traditional insurers, which aligns with the aims of prospective fronting partners such as Bridgehaven. Additionally, he suggests that reinsurers themselves can also benefit from this type of distribution. If a reinsurer has relationships in other jurisdictions, and wishes to provide capacity to a particular customer group in an alternative market whilst remaining compliant in the UK, a partner can front for and retain risk on their behalf. Paul also notes that captives may be interested in this solution, particularly given the government’s recently asserted interest in making the UK a jurisdiction of choice for those subsidiaries. Paul anticipates that many more fronters are likely to emerge in the UK in the next few years. The profitability of this approach has enormous potential in bringing new, diverse capacity to the UK market. He dismisses the notion that hybrid fronters will compete with one another for this capacity; by contrast