Welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Monday, July 28. In today's briefing, a look at how smaller and riskier insurers are entering storm-ravaged markets across the U.S., enabled by ratings from a tiny company run from Dublin, Ohio. And the stock market is showing signs of speculative frenzy again.

A tiny company is vouching for risky insurers in hurricane country. With climate disasters driving many big nationwide insurers out of risky markets in Louisiana, Florida and elsewhere, smaller insurers have stepped in to fill the gap. And many are getting a critical stamp of approval from Demotech, a tiny Ohio rating company with a unique take on grading financial stability. It rates 98% of the insurers A, for “exceptional,” or the even better A Prime or A Double Prime.

But Demotech’s rosy outlook doesn’t always pan out. Insurers it rated were 30 times as likely to become insolvent as those graded by its main rivals, according to a Wall Street Journal analysis of failures since 2017.

Five signs of a market bubble. Some investors say the action is the latest phase in what has turned into a near-euphoric rebound from April’s tariff turmoil. Since the market tumbled and then turned higher, there has been a stampede into risky assets such as meme stocks, cryptocurrencies and shares of smaller companies that have yet to turn a profit.

To some, this resembles a bubble—a period of frenzied market activity and speculation that artificially inflates asset values, driving prices to an eventual breaking point. 

• Investors Are Flocking to the Stock Market’s Discount Rack

Weir Group subsidiary files asbestos bankruptcy case. Weir Group's nonoperational unit Valves and Controls US filed for chapter 11, seeking to continue talks around a potential resolution of over 2,600 asbestos injury claims.

Valves said it had commenced negotiations with a committee of Asbestos Claimants formed last year about a consensual chapter 11 plan. The unit enters bankruptcy with the goal of continuing negotiations, it said.

"Although Valves disputes all asbestos-related liability, its ever-growing litigation costs are not sustainable, and its remaining assets will likely be depleted years before all existing and future asbestos claims are resolved," it said in its court filing Friday with the U.S. Bankruptcy Court in Wilmington, Del.

Valves said its defense and settlement costs reached nearly $13 million last year, up from under $2 million in 2011. The unit also said that it has made "substantial progress" in negotiations with the claimant committee on the terms of a settlement, and filed bankruptcy before talks had concluded because its insurance coverage was near exhaustion. —Andrew Scurria

More U.K. companies hit by critical financial distress, study says. The number of U.K. businesses in critical financial distress surged in the second quarter, reflecting the challenging economic environment, according to a study by consultancy Begbies Traynor.

Nearly 50,000 businesses are in critical financial distress due to a volatile consumer spending, a challenging global economy and tax rises, the U.K. business recovery, financial advisory and property services consultancy said in its latest Red Flag Alert report on Monday.

Critical financial distress jumped 21% on year in the second quarter of the year to 49,309 businesses, representing an 8.6% increase from the first quarter.

Consumer-facing sectors, such as bars and restaurants, travel and tourism and general retailers, also showed concerning trends over the last 12 months, the report said.

"The sharp rise in critical distress underscores just how tough the economic environment is for U.K. businesses and it's abundantly clear that tens of thousands of firms are struggling to stay afloat," Executive Chairman Ric Traynor said. —Najat Kantouar

Private credit and wealth strategies boost Blackstone’s growth. Blackstone is betting its private-credit strategies and funds tailored to wealthy investors will continue to boost its earnings, as the asset manager reported strong returns for this year’s second quarter.

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