Vesttoo scandal aftershocks still rocking insurance sector
Vesttoo scandal aftershocks still rocking insurance sector
Clear Blue Insurance Group is among those to have been affected by the alleged fraud that took place on the Israeli startup’s platform
Clear Blue Insurance Group is among the insurance companies to have released statements aimed at reassuring their clients in the wake of the Vesttoo scandal.
Calcalist revealed 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.
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.
Clear Blue attempted to reassure its clients by adding that its “risk management processes have protected its claims paying ability,” and that it “will continue to collect all premiums going forward for those Vesttoo/China Construction Bank transactions.”
The company added that it will no longer "be accepting Vesttoo as reinsurance capacity on new or renewal programs going forward.”
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.”
