Trisura impairment a cautionary tale for captive fronting business

• Trisura sees 30% share price fall after fronting failure
• Growth in MGA fronting prompts fears of race to the bottom
• Pure and group captive fronting viewed as less risky
• Competitive marketplace requires additional due diligence from captive owners
• Gross cession and 100% fronting becoming increasingly popular for captives

News of Trisura Group’s multi-million dollar write-down and subsequent stock drop has caught the fronting, and wider commercial market’s attention, but fears of a “race to the bottom” are not expected to impact traditional pure and group captive programmes.

In March, AM Best revised its outlook for Trisura Group to negative from stable, after the Canadian insurer had revealed a CAD 81.5m one-time write-down of reinsurance recoverables in Q4 resulting from its fronting of a US property and casualty captive programme.