NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned insurance financial strength ratings (IFSR) of A- with a Stable Outlook to the insurance subsidiaries of Clear Blue Financial Holdings, LLC (CBFH) – Clear Blue Specialty Insurance Company (CBSIC) and Clear Blue Insurance Company (CBIC) (together, referred to as Clear Blue). Additionally, KBRA has assigned an issuer rating of BBB- with a Stable Outlook to CBFH. CBSIC is an excess and surplus lines property/casualty company domiciled in Charlotte, North Carolina; CBIC is an admitted property/casualty insurer domiciled in Chicago, Illinois.
The ratings reflect Clear Blue’s sound capitalization, favorable underwriting leverage, conservative investment portfolio, and limited underwriting risk as a pure fronting specialist. KBRA believes capital is sufficient to support the company’s strategy as a fronting carrier in the medium-term. Clear Blue operates as a limited risk-bearing insurance organization that enables traditional and alternative reinsurers to access the U.S. market. Clear Blue has benefitted from the historical financial support from Pine Brook Partners (Pine Brook), a New York City-based private equity firm. Pine Brook has considerable experience and success investing in the insurance sector, having been investors in multiple ventures. Pine Brook assisted in the formation of Clear Blue’s corporate structure, including the effective use of an admitted and non-admitted carriers as well as an efficient Puerto Rico-based holding company and servicing company structure, which includes tax benefits and considerable service fee income.
Clear Blue’s management team has extensive experience in the fronting business with long-term working relationships, as well as external business partners and reinsurers. Further, there is limited competition from pure fronting companies, with an increasing appetite from reinsurers due to current capital levels. Lastly, Clear Blue maintains a formalized and sound enterprise risk management framework that is designed to identify and substantially mitigate the organization’s material risks.
Balancing these strengths is the relative start-up nature of the company and the execution risk for Clear Blue’s management team. The business strategy places a strong reliance on reinsurance which creates the potential of failure to pay because of disputes or slow paying reinsurers. However, KBRA believes Clear Blue has substantially mitigated this exposure. In addition, despite no retained written premium, gross premium leverage is increasing, with this trend expected to continue in the near to medium-term. Finally, key person risk exists due to the significant unique expertise of senior members of the management team.
The ratings are based on KBRA’s Global Insurer & Insurance Holding Company Rating Methodology published on October 10, 2017.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
