By Chris Munro

April 24 - (The Insurer) - Fronting market direct premiums written (DPW) increased by double digits in 2024 but there is a growing divergence in expansion rates among companies as competition for high-quality MGA business intensifies, according to a new study from Lexicon Associates.

The company’s latest study, New Frontiers: The Future of Fronting, shows that fronting DPW totalled $20.2 billion in 2024, an increase of 24.0% from the prior year.

This maintained the sector’s strong expansion over recent years, with Lexicon Associates putting the market’s compound annual growth rate at 30.9% from 2019 to 2024.

On a DPW basis, Lexicon Associates said the fronting market has been the fastest-growing insurance sector in the U.S. across those five years, coming in ahead of the 25.0% CAGR delivered by the cyber market from 2019 to 2024.

“Fronting companies have established a central role in the MGA ecosystem, writing more than $20 billion in annual premium, as capacity from traditional sources has fallen short of explosive market demand,” Lexicon Associates explained in its study.

The four largest fronting groups all recorded significant CAGRs over the last five years.

Markel-owned State National is by far the biggest player in the market, generating north of $3.64 billion of DPW in 2024, followed by MS Transverse ($2.01 billion), Clear Blue ($1.67 billion) and Trisura ($1.40 billion).

Lexicon Associates said MGAs in the U.S. now depend heavily on 23 groups transacting business through 41 fronting companies, although there is considerable divergence in each entity’s growth trajectory.

That divergence, Lexicon Associates said, is being driven by increasing competition for high-quality MGA business.

Even with that market dynamic, Lexicon Associates’ report noted that all but four of the 23 groups tracked by its study increased their DPW in 2024.

MS Transverse led the way, with its DPW growing by $1.11 billion year on year driven by a combination of new MGA relationships and an expansion of existing tie-ups.

State National’s DPW increased by $715.5 million in 2024, fuelled by new MGA tie-ups, including a notable deal with TIH Insurance Holdings, along with a broadening of some existing partnerships.

Elsewhere, Accelerant added $585.4 million of DPW to its portfolio in 2024, while Markel – as part of its fronting deal for its Nephila unit – brought on another $465.2 million, and Obsidian expanded its book by $187.9 million last year.

The report added that consolidation in the U.S. MGA market means that large transactions – those that comprise over $100 million in capacity and which often involve support from the capital markets – are increasingly driving fronting company growth.

Lexicon Associates said that fronting carriers have increasingly turned to the fast-growing ILS market for collateralised reinsurance support.

Property-focused MGAs “have been major buyers” of such backing, Lexicon Associates said.

Examples include catastrophe-focused MGA AmRisc sponsoring its Trouvaille Re sidecar to support its writing of E&S coastal property business.

As Lexicon Associates detailed, Trouvaille Re renewed on April 1, 2025 with $580 million in underwriting capital from investors and fronting carrier MS Transverse.

Elsewhere, Starwind Specialty’s Fractal Re sidecar was launched to write casualty reinsurance, with the entity backed by $270 million in ILS investments and fronted by State National.

Another example is the catastrophe bond and sidecar supporting the writings of California wildfire-focused MGA Bamboo.

The cat bond, called Greengrove Re, provides Sutton National-fronted Bamboo with $100 million of reinsurance protection against fires in California, while the sidecar, Greenshoots Re, offers another $70 million of coverage.

While collateralised reinsurance support is a useful tool for the fronting market, Lexicon Associates highlighted that it does come with some challenges.

Lexicon Associates said fronting carriers are “heavy users” of “unauthorised collateralised reinsurance”.

“The inclusion of loss caps and corridors in reinsurance contracts means that, in certain circumstances, the collateral will prove inadequate to cover all losses,” Lexicon Associates highlighted.

Despite such challenges, Lexicon Associates said the fronting model “has proved robust”, with the sector weathering the collapse of Vesttoo in 2023 after letters of credit supporting collateralised deals the insurtech had facilitated were found to be fraudulent.

However, looking ahead, Lexicon Associates forecast the fronting sector “will come under greater stress as the supply of new high-quality MGAs diminishes in the United States”.