Document background
The Fronting Agreement (Insurance) is a crucial document in the Canadian insurance market, used when a party wishes to provide insurance coverage but lacks the necessary licenses or regulatory approvals to issue policies directly. This arrangement is common in situations involving captive insurance companies, international insurers seeking Canadian market access, or specialized risk transfer programs. The agreement outlines how the fronting insurer will issue policies, handle premiums and claims, and transfer the risk to the reinsurer/principal, while ensuring compliance with Canadian federal and provincial insurance regulations. It's particularly important in highly regulated industries where insurance requirements are strict, or in complex multinational insurance programs where local policy issuance is required. The document includes detailed provisions for security arrangements, regulatory reporting, and operational procedures, making it essential for establishing clear responsibilities and risk transfer mechanisms between the parties.
