Bermuda reinsurer Alea Group Holdings said today its ratings from A.M. Best Co. have been placed under review for a possible downgrade because of capitalization and loss-reserve concerns.
Separately, the reinsurer also announced it received a subpoena from the U.S. Securities and Exchange Commission relating to non-traditional finite insurance products.
The Oldwick, N.J.-based A.M. Best Co. has placed its "A-minus" financial strength rating and the "a-minus" issuer credit rating for Alea's operating units under review with "negative" implications.
According to Best, Alea's prospective risk-adjusted capitalization is under pressure and there could also be further volatility in the reinsurer's prior-year loss reserves. (In March, Alea announced a $72.5 million reserve charge, prompted by higher claims activity and actuarial reviews.)
Mark Ricciardelli, Alea's chief executive, said he is "disappointed with A.M. Best's decision." Mr. Ricciardelli also added that to keep its Best ratings from getting downgraded, Alea may need to raise extra capital.
"Alea is considering the most appropriate and expedient method for addressing A.M. Best's concerns and maintaining its ratings, which would include raising additional capital, the exact form of which we will begin discussing with our financial advisers," he said.
Separately, Alea revealed it received a subpoena from the SEC in an industrywide investigation, relating to certain non-traditional, or loss mitigation, insurance products.
The SEC has been examining such contracts in a probe of transactions used by companies to create a false financial picture.
"We received the subpoena late yesterday [Thursday]. We intend to fully cooperate in responding. It's an industrywide investigation, and that's the best we can tell you at this point," Alea spokesman Keith Anderson told National Underwriter.
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