As the Fronting World Turns: Developments and Midyear Results - 2023 Focus Series


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This fronting market update represents Conning’s second report on this sector, following our initial report of June 27 entitled The Fronting Market—At an Inflection Point. We also published a Conning Commentary article titled “All Vesttoo, All the Time” in early September. Those following the fronting market are aware of the wild ride it has experienced in 2023 thus far. This report provides an analysis of recent developments as well as a review of midyear 2023 results for our fronting universe.


Fronting market developments fall into several categories, including:



  • Vesttoo. The most widely discussed fronting market topic. Recent disclosures have shed light on the nature of the fraud. It is likely there will be further ramifications as it unfolds.

  • Transactions. A transaction lull followed the Vesttoo news in mid-July. However, activity has picked up substantially with several reported sale discussions led by R&Q’s announced sale of Accredited to private equity firm Onex. 

  • “Events Subsequent” Disclosure. We dive deeper into how individual fronts have handled second-quarter Vesttoo-related disclosures and related charges.

  • New Reinsurers. Interim Schedule F filings disclose new reinsurers in the year-to-date period, and we list these for each company, broken out between authorized and unauthorized.

  • New Entrants. Somewhat surprisingly, there have been several, and we provide a brief profile on each.



Table of Contents:


1. Introduction


2. Recent Developments


3. Vesttoo


4. Sudden Surge in Transaction Activity


5. "Events Subsequent" Disclosure


6. New Reinsurers


7. More New Entrants


8. First-half 2023 Results Comparison


9. Summary


Introduction

Given the rapidly evolving nature of this market, we will produce another update report upon availability of the nine-month financial results.