Hybrid fronting’s ‘explosive’ growth; Bridgehaven first of its kind in the UK

In the US, there are currently between 20 and 30 hybrid fronters that have sprung up with the business model’s growing popularity.

However, Bridgehaven is the first hybrid fronter to bring the business model to the UK, setting up last year, with Paul Jewell (pictured) as the CEO of the firm, which specialising in a mix of commercial and specialty lines.

Jewell’s storied career has taken him from Spain, to the Middle East, Ireland and the US, working for startups, reinsurers, insurers and managing general agents (MGAs). Hybrid fronting could be seen to lever much from this breadth of experience.

“This all came to a head in 2022,” he says, “when I put in an application to a regulator for a hybrid fronter. It was the first insurer to be approved in three or four years by the UK’s Prudential Regulation Authority.

“In July 2023, we were authorised to begin work as Bridgehaven. We’re a separately regulated entity, and we have this moniker of a ‘hybrid fronter’. We are our AM Best rated, and we utilise and partner with reinsurers,” he continues.

Many will be reaching for a definition of what a ‘hybrid fronter’ is.

Fronting—where a licensed, admitted insurer issues an insurance policy on behalf of a self-insured organisation or captive insurer without the intention of transferring any of the risk—has been used in the industry for many years. Hybrid fronting, however, is a new frontier.

Jewell explains it as thus. “We are an insurance company, first and foremost” he says. “Fronting tends to be used to describe when an insurance company is just to facilitate the issuance and compliance of a local policy in a jurisdiction. It would tend to be done when another insurer or reinsurer wants to be compliant in a local jurisdiction. What it does, by its very nature, is pass the underwriting risk back to the master policy, fronting for some other capital provider.”

He continues: “Usually, the fronter doesn’t do anything other than the regulatory side, just issuing the policy and having the license. They consequently don’t focus on the underwriting risk or much else, apart from the distribution. They’re just issuing the policy for whoever needs it. Hybrid fronting is very different. We’re an insurance company. We retain risk to the balance sheet, and we underwrite the original business that we write.”

A hybrid front, he explains, is an insurance company that partners with an MGA, but is leveraged and works closely with reinsurance capital. The reason for this, says Jewell, is that reinsurers in 2024 are often pushed to the margins by things like catastrophe exposure and tail risk, shifted away from their originating businesses.

More insurers in 2024 are looking at their own balance sheets and opting for more retention, he emphasises. It is a cycle, says Jewell, that has ebbed and flowed in recent history. It has meant that reinsurers are looking at diversification along multiple lines—product, geography, excess of loss.

Jewells says: “These reinsurers have realised that they have distribution platforms through MGAs – one of the fastest-growing sectors in the insurance market. The reason for this is that they’re up against traditional insurers that they’re not clear on their distribution strategy. They may have branches that are direct to consumers, or have fragmented models, or a cost base that is so heavy that they’re not able to come up with an economic deal that works with MGAs.”

It is this, he says, that has led to the “explosion” of growth of hybrid fronters in the US.

Bridgehaven is the first hybrid fronter in the UK to be licensed under this business model and focuses on MGAs, all specialty classes and products – aviation, marine, trade credit and surety, property and liability. It is, he admits, a broad panel.

And the company wants to work with other reinsurers. There would, says Jewell, be numerous benefits to this: the reinsurers would get access to new business on a quota-share basis and bigger premium volumes.

“They’re also getting access to us as an insurance company and partner that takes care of the underwriting risk,” he says. “We are an underwriting company. We’re aligned with the reinsurers and the MGAs to make sure that we’re deriving underwriting profit.

“We see ourselves as taking care of the reinsurer’s capital, as well as our own, because we retain risk to the balance sheet—we retain between 10% and 15% on our balance sheet, with the other 85-90% using quota-share reinsurance,” he adds.

Part of Bridgehaven’s model relies on selling the strength of its decision making for putting together a portfolio among the different MGAs. Recent deals have involved MGAs on both sides of the pond, with Brown & Brown in the US, and Dual, part of Howden Group, in the UK.

“We will partner with 30-40 MGAs,” he concludes. “Each one will generate about £25m in gross written premium (GWP). so you’re talking somewhere in excess of £1bn GWP within about five years. Diversification is important; you need to have that broad product spread. It’s an obvious adage, but we don’t have legacy, so we can build that up from the beginning.”