An unlicensed insurer (captive or self-insured) enters into a contract with a licensed and licensed insurer (such as Benchmark) to issue an insurance policy that meets regulatory and/or certification requirements. The risk of loss remains borne by the prisoner or self-insured person through an exemption agreement. Fronting is really a special form of reinsurance. A front-end insurance company is licensed in the State where the captive presents a risk. The captive contract with the front insurance company, which issues a paper insurance policy that includes the letterhead of the façade company. Then, both parties sign a frontal agreement that transfers the risk to the prisoner. Ultimately, the captive receives an insurance policy from the front-end company, and the risk lies with the captive. Most states require companies to prove that they are covered by a licensed insurer for things like workers` compensation insurance and auto liability. By using a front-end company, the captive can avoid having to purchase licenses in any state where it wants to offer insurance because the front-end company has the necessary licenses.

The main purpose of front-end insurance is to allow the captive or organization to issue policies in states where it is not authorized. The other objectives are to comply with insurance regulations and provide the captive with access to other services such as claims processing and transfer of excess risk in a cost-effective manner. Insurance fronting can be complicated. The good news is that you don`t have to decipher everything yourself. Benchmark`s experts have decades of experience and can guide you through the process. To speak to one of our team members, call 800-283-0622 or contact us online today. The insurance world is known for all sorts of complex and confusing terminology used to describe different relationships – switching, deductible insurance, retrocession and dozens of others. The concept of front-end insurance is one of those confusing ideas for most people, and for good reason. It`s not something you hear about every day, even if it`s happening in the background at companies of all sizes, including some of the largest in the world.

This page describes some of the basics of front-end arrangements so you can better understand them. However, if the person is captive or self-insured does not pay compensation (e.B. becomes insolvent due to massive damage), the front company must comply with the policy. As a result, the façade company assumes the risk and charges a fee for this service. Fees are usually paid as a percentage of the premium. Let`s start with this fundamental question. Essentially, front-end insurance is a term that describes a relationship between two entities: one is an approved means of commercial insurance and the other is a captive or unrelated organization that cannot purchase insurance coverage. The captive, who is neither licensed, uses the front-end company to issue a compliant insurance policy that the captive would otherwise not be able to provide due to his lack of a licence.

The history of prisoners is long and complicated, but it boils down to this: captives are insurance companies founded by their own policyholders and are fully owned and controlled by their own policyholders. In other words, a captive is an insurance company created solely to meet the needs of its parent organization. Prisoners are not allowed and are not admitted, except at the place where it was created (home). For this reason, captives generally cannot take out insurance policies other than their country of residence and must work with a licensed/licensed commercial insurer to issue policies elsewhere. .