Porch Group, a prominent US company specialising in homeowners insurance and home inspection software, has taken legal action against China Construction Bank (CCB), accusing the financial institution of involvement in reinsurance fraud.

The insurer has filed a lawsuit claiming that CCB colluded with individuals from the now bankrupt insurance fintech Vesttoo, to fabricate reinsurance letters of credit (L/Cs).

No reinsurance

Porch's complaint outlines significant financial losses, stating that its subsidiary, Homeowners of America (HOA), had to cover US$80 million in insurance claims that were supposed to be reinsured.

Additionally, Porch alleges it provided US$57 million to stabilise HOA and experienced a drop in its stock price when the fraudulent nature of some reinsurance transactions came to light.

Fabricated L/Cs

The lawsuit seeks unspecified monetary damages and is one of a string of cases brought to the courts in response to the validity of L/Cs used by Vesttoo in the reinsurance market.

Widespread use of fabricated L/Cs is alleged in the Vesttoo fraud, which involved the creation of over 60 fraudulent L/Cs totalling over US$4 billion in imaginary collateral (DC World News, 19 July 2023).

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