2010 Survey Results on Fronting and Reinsurance Released by CICA

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Highlights from the 2010 industry study on the fronting/risk-sharing market were just announced. This survey provides valuable insight into the use of fronting including data on primary reasons for using a fronting carrier, importance of fronting to captives, which fronting companies are used, costs, collateral requirements, yield on invested assets, reinsurance and more.

The results of the annual survey conducted by the Captive Insurance Companies Association (CICA) were presented today at CICA’s 38th Annual International Conference in Orlando, Florida. Although the 2010 CICA survey concentrated on fronting issues as it has in past years, the scope of the survey also includes reinsurance issues and comparative financial information about captives.

Survey Methodology: The survey was drafted and approved by a CICA committee and was conducted by the independent consulting firm of Veris Consulting, LLC, of Reston, VA. Participants were solicited through communications from CICA and through the collaborative efforts of a number of captive domicile trade associations. All participants were guaranteed anonymity and the results were compiled by Veris Consulting without identifying any of the participants.

Overview: A majority of respondents represented single parent captives (53%), followed by risk retention groups (18%), segregated cell captives (16%), and association captives (13%). 73% of respondents reported being domiciled in a US jurisdiction, with 27% domiciled off-shore. 71% of respondents have been in existence for 6 or more years, 27% in existence for 1-5 years, and 2% in existence for less than one year.

Disclaimer: This summary, of necessity, covers only a small portion of the total survey results. Full survey results will be made available only to CICA members on the CICA website as a benefit of membership. These results are based entirely on the information provided by respondents to the survey, who may or may not reflect a statistically accurate sample of the captive industry. Survey findings are also subject to interpretation and these results should not be used to predict future events or influence underwriting or marketing decisions.

Full Report: In approximately 90 days CICA will publish a full report of the 2010 Survey Results. This publication will be free of charge for CICA members and available for purchase by non-members.



  • 85% of respondents listed admitted paper as one of their primary reasons for using a fronting carrier, with regulatory compliance as the next highest reason at 46%.
  • 100% of respondents rated the overall level of importance of fronting to their captive as either “very important” or “important”, while 78% listed having an A Rated fronting company as “very important”.
  • Respondents reported using the following fronting carriers for property and casualty coverage: Chartis/Lexington–37%; Ace and Zurich–18.5% each, followed by Liberty Mutual (11%); Discover Re, Old Republic, and Chubb were all in single digits with 37% of respondents also listing “other." [Note: Some respondents use more than one fronting carrier.}
  • 89% of respondents characterized the price of fronting as “reasonable," with 11% characterizing the price as “expensive." 63% characterized the value of their fronting relationship as “excellent," with the other 37% listing it as “moderate." 0% rated value as low.
  • 48% of respondents reported no change in the cost of fronting from the prior year, while 30% reported an increase in costs of less than 10% and 20% reported a decrease in costs.
  • 93% of respondents reported that collateral was required, compared to 85% the previous year. When asked what kind of collateral wasrequired, letters of credit were named by 76% of respondents, trust accounts by 40% of respondents, and cash by 28% of respondents with 8% naming parental guarantee. (Note: more than one kind of collateral could be selected.)


  • 24% of respondents reported that they considered the price of their reinsurance to be “expensive," 67% reported it as “reasonable," and 9% as “inexpensive."
  • 19% of respondents reported that their reinsurance costs are the same as the prior year, with 43% of respondents reporting an increase and 38% of respondents reporting a decrease.

Yield on Invested Assets

  • A majority (53%) of respondents reported investment yields of 2%-3%, with another 13% reporting investment yields in the 4%-5% range.
  • 22% of respondents reported yields of 0%-1%, but no one reported less than 0%!

Biggest Challenge About Owning a Captive

  • In 2008, the biggest challenges to captive owners were: service concerns (36%), tax concerns (22%), reinsurance (13%) and fronting (9%).
  • In 2009, those challenges changed dramatically: collateral concerns (22%) lead the list, followed by expanded utilization concerns (18%), fronting concerns (14%), service concerns (14%), taxes (12%), and reinsurance (8%).
  • In 2010, the biggest challenges were identified as: Collateral concerns (27%), regulatory issues (16%), policyholder retention/growth (16%), with tax, fronting, and expanded utilization all at 7%. Other issues like reinsurance, service, corporate governance, Solvency II, and ease in closing a captive made up the rest.

Acknowledgment: CICA would like to thank Munich Re America for its generous contribution which provided significant underwriting for the out-of-pocket costs of conducting the 2010 CICA Survey. In particular, we would like to thank Carol Pierce, VP Specialty Markets of Munich Re America, for her leadership in obtaining underwriting support.

For questions regarding the Survey results, contact Catherine Duffin, Chair–CICA Survey Committee, Catherine_Duffin (at) artexrisk (dot) com or Mike Mead–Session Coordinator; mmead (at) mrmeadandco (dot) com


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