Vesttoo: “At a minimum, it appears that procedures were circumvented”
The Israeli insurtech company, embroiled in a scandal after alleged fraud took place on its platform, broke its silence
Over a week since Calcalist revealed that Vesttoo has been rocked by alleged fraud that took place on its platform, the Israeli startup released a statement on Tuesday admitting that “at a minimum, it appears that Vesttoo’s procedures were circumvented.”
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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.
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.
Vesttoo stated last week that it was “conducting a comprehensive third party audit,” but it seems it is still awaiting its full results.
“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 LOCs originated.
“At a minimum, it appears that Vesttoo’s procedures were circumvented,” the company said on Tuesday.
“The company is conducting a rigorous internal and external analysis of the events leading up to the first report of a fraudulent LOC. That process includes the engagement of an experienced investigations team. The Company will use the results of that analysis to take appropriate measures.
“In the meantime, Vesttoo is in the process of communicating with impacted parties – including investors, banks and cedents – and actively working with those who have been affected on potential solutions. The company is committed to understanding what happened.”
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.
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Clear Blue and Vesttoo announced a partnership in August 2022 through which the Israeli startup was set to deploy as much as $1 billion from the capital markets through Clear Blue’s property and casualty programs.
Clear Blue confirmed that it is aware of the allegations and that the “letters of credit issued by the China Construction Bank for reinsurance collateral, on behalf of Vesttoo, are fraudulent.” It said it has been using Vesttoo for reinsurance since early 2022.
On Tuesday, rating company AM Best said it would review collateral arrangements at rated fronting insurance companies following the scandal at Vesttoo.
“Although the details and scope of this issue remain unclear, AM Best is monitoring the rapidly evolving situation and reviewing fronting carriers and other insurers that have material amounts of reinsurance counterparty credit risk and reliance on various forms of collateral,” AM Best said in a press release. “Based on this review, rating actions will be taken as warranted.”
