LOC’s fraudulent allegations led to rating action and threats of litigation
The fallout from the Vesttoo collateral scandal could “delineate” the traditionally strong fronting insurance sector, according to Trisura president and CEO David Clare. But he said a diversified portfolio can be a key differentiator for top carriers and help mitigate any credit risk.
Clare addressed the potential impact of multi-billion-dollar collateral fraud allegations against the embattled insurtech during a Q&A with analysts.
“Any time events like this happen, there is volatility and there are questions in the market. It’s too early to see anything material or commercial happening,” he said. “What I can say is that these types of of events may describe some parts of the prevailing market.”
After an internal investigation, the Israel-based startup blamed the problems on external banks and financial institutions.
Rating agencies have warned that dealing with insurance companies with significant exposure could face rating action and weakening their credit profiles in the wake of the scandal.
Commenting on the crisis, Clare said that changing forms of collateral was “very easy.”
“Traditionally, if you change the forms of collateral, [such as] when you switch to other financial institutions, it’s an easy transition,” Clare said.
“[It would] depends on the financial institutions’ reinsurance relationships and who they choose as partners. Collateral can take many forms, including restricted premiums and cash, and relationships with financial institutions can be transferred to the extent they need.
A diversified business is a ‘differentiator’ in a delineated market
Clare is confident that the ongoing turmoil will not affect Trisura’s core business.
The company’s diverse set of partners, including reinsurers and distribution partners, and a combination of businesses will help it stand out among the rest, according to the CEO.
“We’re not just a top US company,” he said. “Our funding platform is part of a larger organization, including a Canadian entity that has shown strong growth and potential for more than a decade. The size and scale of our entity is quite different than other market participants.”
Do you have thoughts about the wider impact of the Vestoo fraud scandal on the front market? Tell us in the comments.
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