The Bermuda Monetary Authority (BMA) has joined Aon business White Rock Insurance (White Rock) to take action over alleged fraud involving insurtech Vesttoo.
The BMA and White Rock have jointly agreed to a course of action in the Supreme Court of Bermuda. The move is intended to pursue “maximum recovery” for insureds affected by alleged fraud involving Vesttoo and fake letters of credit (LOC), the BMA said in a news release on Friday.
The pair have agreed for the Supreme Court of Bermuda to appoint Charles Thresh and Michael Morrison of Teneo (Bermuda) to act as joint provisional liquidators for impacted White Rock Vesttoo cells, the BMA said.
“This action applies only to the impacted Vesttoo Cells. White Rock Bermuda continues to operate in the ordinary course of business, and this action has no effect on any other cells or White Rock Bermuda clients,” the BMA said in the news release.
The Vesttoo scandal, which relates to the emergence of allegedly fraudulent LOCs provided for reinsurance transactions through the insurtech’s platform, has led to some fronting insurance companies being placed under ratings reviews, and at risk of potential downgrades and credit profile weakening.
The source of the fraud is external to Vesttoo, Israeli insurtech Vesttoo has said.
In the aftermath of the fraud allegations, Vesttoo has laid off 75% of its staff and shuttered some of its offices across Asia. The insurtech’s chief executive Yaniv Bertele and chief financial engineer Alon Lifshitz have reportedly been placed on paid leave.
Earlier this week, the insurtech commenced Chapter 11 proceedings as it faced court action in Israel and the US.
“We believe the steps we are taking are best for Vesttoo’s long-term growth and success,” Vesttoo interim chief executive Ami Barlev said in a statement previously shared with Insurance Business.
“Not only will they result in a strong, more sustainable capital structure, but they will provide us with the platform to aggressively pursue all parties that harmed our business.”
Fallout from the collateral scandal could be set to “delineate” the fronting insurance sector, Trisura president and CEO David Clare told analysts during an earnings call earlier this week. Clare said he did not expect an impact on Trisura’s fronting business.
