The CBB believes that insurance firms need to consider carefully dealing with reinsurers fronting 100% of the risks that is ceded to them. The concern is that the reinsurer ceding 100% of the risk to a retrocessionaire has little incentive to adhere to proper standards of underwriting, due to it receiving a fee, based on maximizing volume of premium, at the expense of underwriting soundness. Fronting arrangements can result in abrupt cancellation by the assuming reinsurer and sometimes refusal to pay claims because of the lack of observation of the understandings with regard to business quality that were agreed upon when the arrangement was negotiated. Consequently, insurers may have to assume risks for which they believed to have covered through a proper reinsurance arrangement, should the reinsurer no longer honour the arrangement. The CBB will scrutinise carefully the management by firms of the risks associated with fronting, in the course of its supervision.