Fronting and program specialist Clear Blue Insurance Group has released a statement affirming that it remains “singularly focused on resolving all issues related to certain invalid letters of credit,” and is working quickly to ensure the “smooth replacement of reinsurance capacity” on a small portion of its nearly $2 billion book of business.
Amid an ongoing investigation of alleged fraudulent letters of credit (LOC) issued by the China Construction Bank for reinsurance collateral, on behalf of Vesttoo, Clear Blue confirmed earlier this week that its insurance companies have used Vesttoo for reinsurance capacity on certain programs over the past 18 months.
Meanwhile, just days ago, global rating agency AM Best placed Clear Blue’s credit ratings under review with negative implications, citing uncertainty around the firm’s ability to rely on certain LOC posted to back reinsurance.
Despite the move to place the ratings of the members of Clear Blue under review with negative implications, AM Best has maintained the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent).
Now, in a forward-looking statement, Clear Blue has said it, “continues to operate in the normal course, without any financial impairment.”
The firm continued, “We remain singularly focused on resolving all issues related to certain invalid letters of credit issued to Clear Blue in a timely manner, while continuing to provide best-in-class insurance programs to our partners nationwide.”
“The process to reconfirm our A- rating from AM Best is clear and well underway. We are working quickly to ensure the smooth replacement of reinsurance capacity on a small portion of our nearly $2 billion book of business and estimate that this can be completed within 90 days.”
According to Clear Blue, AM Best has committed to immediately review their ratings decision with the goal of returning the firm’s rating to A- stable as soon as Clear Blue provides evidence that all Vesttoo-related reinsurance capacity has been replaced.
Concluding its forward-looking statement, Clear Blue said, “In less than two weeks, we have already secured replacement for more than 50% of the affected reinsurance programs.
“We retained all premiums on Vesttoo-related reinsurance programs such that all cash is on hand to pay expected losses. Clear Blue’s companies’ surplus remains at $176 million to support and backstop all obligations.
“As previously stated, Clear Blue will continue to ensure all claims are paid and we remain highly confident in our ability to meet the AM Best requirements, replace Vesttoo reinsurance and collateral within a reasonable period, and maintain Clear Blue’s strong capital position and growth.”
