Aon’s broker, White Rock Insurance (SAC) Ltd. has demanded US$136.7 million to be returned from troubled insurtech Vesttoo.
The sum, according to AON, is collateral that the segregated accounts and transformer structure distributed to the company. Meanwhile, Vesttoo has begun Chapter 11 proceedings to restructure and has also laid off 75% of its staff.
Aon secures temporary restraining order against Vesttoo’s funds
Aon, through its White Rock vehicle, has also secured a temporary restraining order to freeze Vesttoo’s funds as a result of allegations involving fraudulent/forged letters of credit (LOCs) backing collateralised reinsurance transactions.
The industry media outlet Reinsurance News has also reported seeing court documents and stated that White Rock is calling for the return of $136.7 million “in collateral as the validity of LOCs delivered by the insurtech is being investigated.”
A communication from the legal representatives of White Rock serves as formal notification of a violation termed as “Vesttoo’s breach” concerning the Participating Shareholder’s Agreements (PSAs).
The paper outlines the situation where; “Vesttoo presented White Rock with Letters of Credit that purported to enable the PSAs’ Segregated Accounts to meet any and all liabilities and any and all collateral requirements. In reliance on these Letters of Credit and Vesttoo’s representations, White Rock made distributions from the Segregated Accounts to Vesttoo under clause 3 of the PSAs, totaling approximately $136.7 million.
“However, White Rock now understands that the banks identified in the Letters of Credit provided by Vesttoo have taken the position that the Letters of Credit are fraudulent. Indeed, Vesttoo has stated publicly that its procedures were circumvented, leading to the apparent fraud,” Reinsurance News reported.
The letter continues to stress that Vesttoo is in breach of its obligations under the PSAs, including its obligation to provide Acceptable Security.
“White Rock demands that Vesttoo immediately return all distributions made from the Segregated Accounts and comply with its obligations under the PSAs,” says the letter.
Initiation of Chapter 11 proceedings aimed at safeguarding assets has been announced
Under the shelter of Chapter 11 safeguards, Vesttoo can execute its reorganisation strategy and continue regular business activities, all while being safeguarded against claims from creditors.
In a press release sent via email, Vesttoo articulated its intention “to come out of this procedure as a more resilient collaborator for all parties involved,” and said it wanted to avoid liquidating the challenged entity. The company underscored the stability and sustainability of its platform and financial framework within the ambit of Chapter 11 safeguarding.
The insurtech organisation clarified that the decision to opt for Chapter 11 was arrived at to ensure the protection of the company’s assets and provide a platform to pursue legal recourse against those accountable for the fraudulent letters of credit debacle that has enveloped Vesttoo.
In a statement sent to Insurance Business, interim chief executive Ami Barlev said: “We believe the steps we are taking are best for Vesttoo’s long-term growth and success. Not only will they result in a strong, more sustainable capital structure, but they will provide us with the platform to aggressively pursue all parties that harmed our business.
Barlev added: “We fully believe that Vesttoo’s unique core technology and experienced team, coupled with the needs of the market, constitute a strong base for rebuilding the company better and stronger than before.”
Sources: Multiple
