Alea subpoenaed regarding finite investigations

Alea Group Holdings Ltd. recently received a subpoena from the U.S. Securities and Exchange Commission (SEC) requesting its insurance documents relating to certain non- traditional, or loss mitigation, insurance products, according to a news statement made by the Company. “Alea intends to fully cooperate in responding” with the subpoena, which was received on June 9,” the Company says in the statement. The subpoena, also received by over a dozen other reinsurers, is a direct result of More investigations lead by the SEC and New York Attorney General Eliot Spitzer regarding the use of finite reinsurance policies used to mask losses even though little or no risk is transferred. In a separate matter, Alea says it may raise capital to maintain its financial strength rating in response to AM Best’s recent move to cut Alea’s financial strength rating and credit rating of A-. AM Best has placed Alea’s ratings under review ‘with negative implications’ as a reflection of the fact that the Company’s ‘capitalisation is under pressure and that the potential exists for further volatility in prior year loss reserves.’ Shares in Alea decreased after the specialty insurer and reinsurer warned that it may have to raise extra capital to ward off a downgrade in its credit ratings.