Markel Fronting Arrangement

3 Months Ended

Mar. 31, 2026

Markel Fronting Arrangment [Abstract]

3 — Markel Fronting Arrangement

The Company is party to a master relationship agreement and associated agency and claims services agreements with Markel. Under these agreements, the Company's U.S. MGA subsidiary is licensed and authorized to underwrite, sell, and service insurance policies written through Essentia, which serves as the dedicated carrier for Hagerty's specialty collector vehicle insurance policies in the U.S.

On December 31, 2025, the Company entered into new contractual arrangements and amended the terms of its existing contractual arrangements with Markel and its affiliates. These coordinated transactions with Markel formed the Markel Fronting Arrangement, which became effective January 1, 2026. Under the Markel Fronting Arrangement: (i) the Company continues to issue policies through Essentia, with its underwriting authority (including pricing decisions, rate filing, insurance rating, and risk selections) and claims authority expanded to the maximum levels permitted by applicable law; (ii) the Company assumed increased administrative responsibilities for the policies issued through Essentia; (iii) Hagerty Re controls 100% of the premium and assumes 100% of the risk for policies issued through Essentia; and (iv) Hagerty Re pays an initial fronting fee, representing 2% of written premium, to Markel for administrative support, which incrementally decreases based on the level of written premium in each calendar year.

Due to the expanded underwriting and claims authority granted under the Markel Fronting Arrangement, the Company now controls the Essentia book of business. While the Company's U.S. MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of the Company's MGA services with respect to the Essentia book of business is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, the Company is no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in its Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 is continuing to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by the Company's U.S. MGA subsidiary for Essentia policies issued in 2026 will be deferred and amortized over the policy term.

On December 31, 2025, in connection with the Markel Fronting Arrangement, the Company entered into a loss portfolio transfer agreement (the "LPT Agreement") that became effective on January 1, 2026. Pursuant to the LPT Agreement, Hagerty Re assumed 100% of the net retained liabilities for Essentia-originated policies issued prior to January 1, 2026 and received $50.5 million in cash consideration. The Company is accounting for the LPT Agreement using the deposit method of accounting. At inception, the Company recorded the $50.5 million of cash consideration received as a deposit liability within "Other liabilities" on the Condensed Consolidated Balance Sheets. As of January 1, 2026, the estimated value of the liabilities assumed under the LPT Agreement was approximately $42.7 million, resulting in an initial deferred gain of $7.8 million, which is being recognized over the expected period of future claim payments within "Interest expense and other, net" in the Condensed Consolidated Statements of Operations. The table below presents changes in the deposit liability associated with the LPT Agreement during the three months ended March 31, 2026:


	in thousands
Balance as of January 1, 2026	$	50,500
Amortization of deferred gain	(1,308)
Claim payments	(9,248)
Balance as of March 31, 2026	$	39,944