Mr. Mead, a past chairman of the Captive Insurance Companies Association, said the effort to find a solution to the fronting shortage involves a group of captive experts.

“Fronting is the issue that still remains high on everyone's list, if not at the top,” he said. “Clearly there is still some fronting going on, but it is getting a lot more difficult” to find.

Fronting is an agreement by an insurer to issue a policy on behalf of a captive insurer. Typically the front would write the risk for a location where it is licensed, but the captive is not. The captive would then take the entire risk.

Mr. Mead revealed he has been involved in a project for several months that may “provide some form of a solution to the fronting dilemmas.”

At this point, “I can say that there are a group of members of CICA who have talked to me about coming up with a solution to their perception to a reduced number of carriers doing fronting, and in their view, the onerous requirements of some of these carriers,” he said.

Mr. Mead said he is working with several insurers already in existence “that don't do [fronting] now.”

But “there are a lot of constituents that have to be satisfied,” including regulators, rating agencies, chief financial officers and chief executive officers.

So far, he said, two attorneys, an actuary, a former insurance company CEO, a half-dozen members of CICA and a half-dozen people outside of CICA with similar issues are involved in structuring a business plan that could be in place by the end of this year. The basic theory, he said, is that captives would be able to control their own fronting. “It is not that simple, but I think it is doable,” he said.

Mr. Mead added: “I have to emphasize that fronting is not an issue for everybody. There are still a lot of [insurance] companies doing fronts, and a lot of [captives] happy with their situations.”

“There just isn't enough competition at the moment, and so we're trying to inject a little competition,” Mr. Mead said.

Reproduced from National Underwriter Edition, April 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.