Accurate calculation of transient overvoltages and dielectric stresses from fast-front excitations is required to obtain an optimal dielectric design of power components subjected to these conditions, which are commonly due to switching and lightning, as well as utilization of power-electronic devices. Toroidal transformers are generally used at the low voltage level. However, recent investigations and developments have explored their use at the medium voltage level. This paper analyzes the model-based improvement of the insulation design of medium voltage toroidal transformers. Lumped and distributed parameter models are used and compared to predict the transient response and dielectric stress along the transformer winding. The parameters of the toroidal transformer are computed using the finite element method considering a three-dimensional geometry. Different strategies for insulation design are proposed by means of optimal insulation thickness and electrostatic shield to reduce transient overvoltage and dielectric stress. The results show that the proposed optimal insulation design based on particle swarm optimization with electrostatic shield can substantially reduce the dielectric stress and dielectric distances. Comparison between simulations and experimental results demonstrates that the frequency domain modeling approach results in accurate calculation of transient overvoltages produced by fast front excitation and can be used effectively for insulation design.