Vesttoo outstanding transactions estimated at between $5-10 billion - Morningstar
The fraud at Vesttoo came to light when one of the letters of credit on the platform was found to be fake, leading to a comprehensive review of all LOCs on the Israeli company's system
Rating agency DBRS Morningstar estimates that Vesttoo's total size of outstanding transactions is between $5 billion and $10 billion.
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“We estimate the total size of outstanding transactions to be between $5 billion and $10 billion based on the Company’s total revenue of approximately $200 million in 2022. Several insurance companies have already suspended further transactions in the Vesttoo platform until their investigations are complete," read a DBRS Morningstar statement released on Thursday.
The Israeli startup released a statement on Tuesday admitting that “at a minimum, it appears that Vesttoo’s procedures were circumvented.”
Calcalist uncovered last week that the allegedly fake letters of credit (LOCs) provided by investors to insurers for reinsurance transactions on the Vesttoo platform are believed to total a sum of around $4 billion.
Vesttoo denied Morningstar's figures. "The numbers published by Morningstar cannot possibly be realistic, as Vesttoo never obtained that sum of collateral from investors. An external audit is being conducted, at the end of which it will be possible to assess the exposure. Regardless, we can already comment that the numbers are much smaller than what was published."
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The fraud came to light when one of the LOCs was found to be fake, leading to a comprehensive review of all letters of credit issued by the company.
Earlier this week, Clear Blue Insurance Group and Obsidian Insurance Holdings were among the companies who released statements aimed at reassuring their clients in the wake of the Vesttoo scandal.
“The widespread issue with LOCs in the Vesttoo platform could have ramifications for the broader insurance and reinsurance market, particularly for fronting specialist companies, as well as for insurance brokers involved in the arrangement of these deals, with likely more than one cedent being involved,” DBRS Morningstar said. “A weakening of confidence in collateralized reinsurance deals could have unexpected consequences for the industry, including the overall reduction of reinsurance capital available.”
