-

KBRA Releases Research – What Could Possibly Go Wrong? Fronting Market Changes Overnight

NEW YORK--(BUSINESS WIRE)--KBRA releases research that examines recent events in the fronting market, as well as what the future may hold for the sector.

The insurance fronting space was a fairly stable and predictable sector for over a decade, characterized by an attractive market opportunity, plenty of capital to start up businesses, demand for well-rated carriers to provide fronting services, and growth in aggregate managing general agent (MGA) premiums as well as a rising proportion of MGA volume that flowed through fronting carriers. But two recent major events completely changed the fronting market: Alleged claims of potentially fraudulent letters of credit (LOC) collateral from a single non-U.S. bank related to transactions facilitated by Vesttoo, and an $81.5 million pretax write-down of a reinsurance recoverable by fronting carrier Trisura.

Key Takeaways

  • The reputation of those in the insurance value chain is likely to suffer short-term damage as various fronting insurers, reinsurers, cedants, brokers, and MGAs assess the full financial and operational impacts of recent events.
  • KBRA notes that recent negative events underscore the critical importance of effective enterprise risk management and could be positive catalysts for change.
  • Some broader mergers and acquisitions opportunities may emerge due to the sector’s structure, while some are already underway due to evolving strategies.
  • KBRA believes the sector is well positioned to apply the lessons learned and potentially emerge as a stronger and more robust participant in the overall insurance market.

Click here to view the report.

Related Publications

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Contacts

Donna Halverstadt
Managing Director
+1 646-731-3352
donna.halverstadt@kbra.com

Carol Pierce
Senior Director
+1 646-731-3307
carol.pierce@kbra.com

Jonathan Harris
Senior Director
+1 646-731-1235
jonathan.harris@kbra.com

Peter Giacone
Senior Managing Director
+1 646-731-2407
peter.giacone@kbra.com

Business Development Contact

Tina Bukow
Managing Director
+1 646-731-2368
tina.bukow@kbra.com

KBRA

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Donna Halverstadt
Managing Director
+1 646-731-3352
donna.halverstadt@kbra.com

Carol Pierce
Senior Director
+1 646-731-3307
carol.pierce@kbra.com

Jonathan Harris
Senior Director
+1 646-731-1235
jonathan.harris@kbra.com

Peter Giacone
Senior Managing Director
+1 646-731-2407
peter.giacone@kbra.com

Business Development Contact

Tina Bukow
Managing Director
+1 646-731-2368
tina.bukow@kbra.com

More News From KBRA

KBRA Assigns Preliminary Ratings to Deephaven Residential Mortgage Trust 2026-INV1 (DRMT 2026-INV1)

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 8 classes of mortgage-backed notes from Deephaven Residential Mortgage Trust 2026-INV1 (DRMT 2026-INV1). The DRMT 2026-INV1 mortgage loans are secured by first liens on non-owner occupied (NOO) investor properties. All the loans in the pool are exempt from the ATR/QM rule due to being originated for business purposes. As of the cut-off date, the pool comprises 1,153 primarily fixed-rate (98.8%) residential mortgage loans seasoned ap...

KBRA Assigns Preliminary Ratings to Pagaya AI Debt Grantor Trust 2026-1 & Pagaya AI Debt Trust 2026-1

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 15 classes of notes issued by Pagaya AI Debt Grantor Trust 2026-1 & Pagaya AI Debt Trust 2026-1 (collectively “PAID 2026-1”), an unsecured consumer loan ABS transaction. PAID 2026-1 has initial hard credit enhancement levels of 84.86% for the Class A-1 Notes to 2.33% for the Class F-2 Notes. Credit enhancement is comprised of overcollateralization, subordination (except for the Class F-2 Notes), cash reserve accounts funded at c...

KBRA Assigns Preliminary Ratings to LSTR 2026-HTL6

NEW YORK--(BUSINESS WIRE)--KBRA announces the assignment of preliminary ratings to seven classes of LSTR 2026-HTL6, a CMBS single-borrower securitization. The collateral for the transaction is a $500.0 million floating rate, interest-only mortgage loan. The loan has an initial two-year term with three, one-year extension options and requires monthly interest-only payments. The loan is secured by the borrowers’ fee simple, leasehold and sub-leasehold interests in six hotels located in four state...
Back to Newsroom