Monday, 10 April 2017

Fronting fee/policy


I have gone though an invoice submitted by the Contractor to substantiate actual cost incurred by them for obtaining the PII which was measured as a PS. The invoice contains an item called "fronting fee" in addition to the PII policy premium.


So what does it means by fronting fee?


 "Fronting Policy' A risk management technique in which an insurer underwrites a policy to cover a specific risk, but then cedes the risk to a reinsurer. Fronting policies are most commonly used by large organizations, and is a type of alternative risk transfer (ART)."


That means fronting fee is a fee paid by the insurer to a re insurer when they are re insuring a risk, for your information local insurance companies are reassuring their risks with large scale international reinsurance companies.


Fronting companies charge a fee for this service, generally between 5 and 10 percent of the premium being written. 




Reference:http://www.investopedia.com/terms/f/fronting-policy.asphttps://www.irmi.com/online/insurance-glossary/terms/f/fronting.aspx


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