Porch Group, a US insurance and home inspection software provider, has initiated legal action against China Construction Bank Corp (CCB), China’s third-largest lender by assets. The lawsuit alleges the complicity of CCB in what Porch terms a “massive fraud,” a scheme that allegedly inflicted staggering financial losses upon the American company, linked to counterfeit reinsurance letters of credit.
According to Reuters, Porch and its affiliate, Homeowners of America Insurance Co, contend, in a complaint lodged with the US Southern District Court of New York on Thursday, that CCB collaborated with individuals linked to the now-defunct Israeli insurance entity, Vesttoo. Their alleged collaboration birthed a cascade of counterfeit reinsurance letters of credit, ostensibly guaranteeing access to reinsurance funds for insurance companies, it was suggested. However, Porch asserts these documents were duplicitous, leading to profound monetary setbacks on their end.
The timeline of events paints a harrowing picture of financial deceit. Porch and its affiliate purportedly paid substantial premiums for what transpired to be phantom reinsurance. The revelation of this deceit materialized in July 2023, when it emerged that a significant portion of the letters of credit underpinning Vesttoo’s reinsurance transactions were spurious.
Porch underscored the colossal financial toll exacted upon its operations. The Homeowners of America Insurance Co, a subsidiary of Porch, reported that it suffered tens of millions in losses due to a reinsurance facility, allegedly supported by a fictitious $300 million letter of credit from CCB, which rendered the coverage worthless.
Porch asserts it was forced to shoulder a considerable burden, doling out $80 million to fulfill insurance claims that ought to have been reinsured. Additionally, Porch found itself compelled to allocate $57 million to stabilize its subsidiary, Homeowners of America, while witnessing a perceptible downturn in its stock price post-disclosure of the scandal. Porch’s complaint outlines the need to pursue monetary reparations, with exact figures earmarked for determination during the trial process.
Vesttoo filed for Chapter 11 bankruptcy protection in the United States last year. CCB remained conspicuously silent, according to Reuters, offering no immediate commentary on the allegations leveled against it by Porch.
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