Fronting

Arrangement between two insurance companies to produce an insurance policy (usually workers' compensation) for a third party wherein one insurance company produces the official policy (for a fee) but cedes all losses from that policy to the other insurer. This kind of arrangement is used in situations where the insurer writing the risk is not an admitted company in a particular state, and the coverage needs to be written by an admitted carrier. In order to meet the statutory requirements, the first insurer pays a second (admitted) insurer to "front" the policy, even though the first insurer remains responsible for paying all losses arising under the policy. This kind of arrangement is often used by captive insurers when they are not admitted carriers in a particular state.