On occasion an insurer might not be allowed to accept an insurance risk (e.g. it might not be authorised to accept business in that jurisdiction or it might be authorised only to write reinsurance rather than direct insurance). In such event it (or the broker involved) might arrange for an authorised insurer to "front" the business, which is then ceded to the initial company as a reinsurance. The "fronting" insurer is remunerated by way of a fee (which is generally in the form of an over-riding commission on the premium). The practice of providing fronting capacity has one major pitfall which is that the fronting insurer is liable to the insured for the whole of the exposure. This could be a problem in the event that the reinsuring company cannot or will not pay a claim.
A situation where one insurer issues policies and reinsures all or substantially all of the risk to another insurer. Fronting typically is used in jurisdictions where the reinsurer is not licensed to do business.
The practice, in reinsurance, of the ceding company retaining only a small portion of a risk and ceding the remainder to a reinsurer.