New NAIC Model Act Requires Insurers To Tell Insurance Dept. About Frontinq Arrangements.

• Date: 28 January 2019

HONOLULU, Hawaii -- A model act to require that licensed insurance companies notify their state regulators when they are engaged in activities defined generally as "fronting," has been adopted by the National Association of Insurance Commissioners, meeting here for its winter national meeting. The model was adopted at a plenary session on December 5.

NAIC President Steven T. Foster said this act, would provide added protection to consumers from the "sometimes hazardous" practice of fronting. The model would have to be enacted by individual states.

According to an explanation of fronting released by NAIC along with announcement of the model's adoption, it is a practice where an insurer domiciled or licensed in a state cedes business to an unlicensed reinsurer and delegates underwriting or claim settlement authority. It is used when an unlicensed insurer needs a licensed carrier to provide cover--or front--for insurance lines such as automobile and...