Specialty vehicle insurance provider Hagerty has signed a non-binding letter of intent (LOI) with longtime partner Markel, outlining a proposed fronting arrangement that would give Hagerty complete control over its underwriting and investment operations.
The move, announced Thursday, would allow Hagerty Re, the company’s reinsurance arm, to assume 100% of the premiums from its insurance operations beginning Jan. 1, 2026. Under the proposed agreement, Hagerty would pay Markel an initial fronting fee of 2%, with the rate decreasing based on annual policy volume.
“Today’s announcement marks the continued evolution of our highly successful partnership with Markel that began with their acquisition of Essentia in 2013,” said McKeel Hagerty, CEO and chairman of Hagerty.
“Under the newly proposed fronting arrangement, Hagerty will control 100% of the premium from our consistent, high-quality underwriting, positioning us to deliver better profitability and operational control with no disruption to policyholders.”
Details of the plan were further outlined in Hagerty’s July 24 filing on Form 8-K with the US Securities and Exchange Commission. The filing states that Hagerty currently assumes 80% of underwriting risk through Essentia, its Markel-owned underwriting subsidiary, while Markel retains 20% and manages regulatory approvals and other administrative functions. Under the new arrangement, Hagerty Re would assume 100% of both the underwriting risk and premiums, transitioning Markel into a pure fronting carrier role.
According to the company, this transition will simplify Hagerty’s financial reporting by eliminating commission revenues and ceding-commission expenses from its consolidated statements. Beginning in the first quarter of 2026, policy acquisition costs will instead be capitalized and amortized. The change is expected to improve the clarity and comparability of the firm’s insurance results.
This strategic shift comes amid record growth in the managing general agent (MGA) sector. A July 2025 report by Conning showed that US MGAs wrote more than $114 billion in direct premiums during 2024, representing a 16% year-over-year increase and outpacing the broader property/casualty market. By gaining full control of premium flow, Hagerty aims to capture a greater share of underwriting profits while reinforcing its operational independence within a rapidly expanding industry segment.
The company noted that the arrangement remains subject to regulatory approval. Though the agreement is non-binding, Hagerty said it expects to move forward without changes to current policyholder relationships.
A presentation outlining the proposed structure is available on Hagerty’s investor relations website at investor.hagerty.com.
Hagerty serves nearly 890,000 members through its Hagerty Drivers Club and offers specialty insurance, car valuation tools, automotive events, auctions, and media content aimed at car enthusiasts across the US, Canada, and the UK.
What are your thoughts on this deal? Share your insights in the comments below.
