Investigations and some litigation is underway into allegations that fraudulent letters of credit (L/Cs) were used to perpetrate a massive US$4 billion fraud involving insurance fintech, Vesttoo (DC World News, 19 July 2023).

Insurance and reinsurance giant, Aon, has revealed that it is facing legal action over L/Cs related to the Vesttoo collateral investigation.

Other insurers and reinsurers have released statements aimed at reassuring their clients in the wake of the Vesttoo scandal while Corinthian Re has said it will replace any L/Cs apparently provided as collateral by China Construction Bank, the bank named in the apparently fraudulent documents.

Aon litigation

Aon has been working with Vesttoo, with the latter being one of the third parties it has usedto identify capital providers to collateralise the insurance and reinsurance obligations of Aon's clients and counterparties.

Several of its clients and counterparties have either begun or intend to begin legal action related to transactions with Vesttoo that may have been backedby allegedly fraudulent L/Cs according to Aon.

Client reassurance

Corinthian Re, a specialty collateralised reinsurance company,says it is looking to identify and replace collateral for China Construction Bank L/Cs sourced through the Vesttoo platform.

Clear Blue Insurance Group, which last year entered a partnership with Vesttooto deploy US$1 billion in reinsurance capacity,has said it is aware of the allegations and that the "L/Cs issued by the China Construction Bank for reinsurance collateral, on behalf of Vesttoo, are fraudulent."

Vesttoo's investigations

Investigations into the fraud are continuing at Vesttoo itself. "Vesttoo is taking this matter very seriously. While there is still much that is unknown at this stage, the company is doing all it can to determine how and where the fraudulent L/Cs originated," according to a company statement issued last week.

"At a minimum, it appears that Vesttoo's procedures were circumvented," the statement concedes.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.