Vesttoo

The broker said it believes it has meritorious defenses and intends to vigorously fight the claims and seek recourse against third parties where appropriate.

The scale of the coverage offered by the firm means buyers in the emerging line of business face a challenge to swap out their capacity.

This came after the firm said it had begun the process of moving its US E&S business off its Lloyd’s paper as it sets up a new E&S carrier.

The fronting company says it has sufficient premium to pay all claims on the affected programme.

The firm said it will use the results of an analysis being conducted by experienced investigators to "take appropriate measures”.

The ratings agency is currently in discussions with Clear Blue’s management regarding the company’s ability to replace certain programs or letters of credit.

The issues have put a spotlight on partial collateralisation, the leverage of the fronts, and the challenges of assigning responsibility.

Clear Blue has put its sales process on hold as the fronting company assesses the implications of Vesttoo’s collateral inconsistencies, this publication has learned.

The London market businesses face potential fallout as Vesttoo investigates collateral inconsistencies.

The company’s targeted Vescor cat bond would have provided collateral to meet auto and other obligations, but there were multiple structural points of risk for investors.

The fronting company said impairment to Vesttoo’s LoC collateral will be "immaterial".

Fronting companies typically hold premiums in reserve meaning that credit exposure to letters of credit on Vesttoo transactions should only be required in the event of deteriorating losses.