Clear Blue, the start-up risk fronting and program business transformation company that aims to help sources of risk or reinsurance capacity reach program risks and primary insurance business, has been given A- ratings for its two insurers.
Clear Blue Financial Holdings LLC, a Puerto Rico based company, recently completed the acquisition of two clean shell insurance vehicles, both of which have now been rated by A.M. Best, giving it the platform required to provide rated fronting services to unrated and alternative reinsurance capacity.
Founded and led by President Jerome Breslin, previously of Amtrust, Bank of America and AIG, Clear Blue is now ready to enter a space dominated by State National Companies currently. The program business and fronting space is also targeted by other startups, such as the recently formed Spinnaker Insurance Company.
The fronting and program business transformer model sees Clear Blue aiming to leverage its due diligence, underwriting expertise and program management skills to attract managing general agents that want to access alternative or unrated sources of capacity in the global reinsurance markets.
Of course this model can also work in reverse, with sources of reinsurance capital (traditional or alternative) able to work with Clear Blue to source the types of risk they want to back with their capacity.
Clear Blue recently acquired two insurance companies as clean shells, providing it with the multi-state access and ready-made platform to submit for its rating.
The firm has an excess and surplus lines platform, with access in 49 states of the U.S., named Clear Blue Specialty Insurance Company and also an insurer named Clear Blue Insurance Company, which will operate as a multi-line insurance fronting outfit with admittance to 49 U.S. states.
A.M. Best has assigned both companies a financial strength rating of A-(Excellent) and issuer credit ratings of “a-”, with both ratings stable.
A.M. Best explained; “These ratings reflect the companies’ supportive risk-adjusted capital position and the expectations of financial performance within its business plan. Recognition is also given to management’s planned implementation of advanced measures to mitigate contractual, collateral and underwriting risk. Additional consideration was given to management’s projected market profile, operating structure, opportunity for fee-based income and the availability of additional capital.
“Partially offsetting these factors are the inherent concerns with the companies’ profile as start-ups building a supportive base of business. The companies will provide fronting services for a diverse mix of managing general agents. Under this format, A.M. Best is concerned with key operational and execution risks. The companies will cede 100% of their exposures, which increases the potential for credit and dispute risk among participants. The outlooks reflect the expectation that the companies’ results within the initial period will fall within a range of tolerance to the initial expectations.”
Given the focus this business model has received in recent months, due to the opportunity to source, manage and underwrite program risks, of an excess and surplus or primary nature, on a rated fronted basis for alternative sources of reinsurance capital or unrated capital providers, Clear Blue is likely to be in demand.
With the ILS fund manager sector keen to work with rated fronting providers, to shift their efficient risk capital further up the value-chain, the fronting carrier trend also promises to further disrupt the traditional reinsurance model by taking risks out of the syndicated market to a degree.