Brokering giant Aon sets aside $197 million for Vesttoo settlements
Brokering giant Aon sets aside $197 million for Vesttoo settlements
Aon has faced the wrath of some cedents whose reinsurance deals it brokered or facilitated and turned out to be backed by Vesttoo’s fraudulent Letters of Credit
Brokering giant Aon announced in its fourth quarter results for 2023 that it has recognized actual or anticipated legal settlement expenses in connection with the Vesttoo scandal totaling $197 million.
“We strategically wanted to draw a line under this issue for our market partners and for ourselves, so that we were able to move forward together as partners,” Eric Andersen, President of Aon, said during the firm’s earning call last Friday. Aon added that it hopes that “certain potentially meaningful amounts may be recoverable in future periods.”
As a Vesttoo partner, Aon has faced the wrath of some cedents whose reinsurance deals it brokered or facilitated and turned out to be backed by Vesttoo’s fraudulent Letters of Credit. Porch Group, owner of a homeowners insurer, agreed a $30 million strategic arrangement with Aon, agreeing to drop all claims related to a forged LOC backing its reinsurance deal. Aon is also facing legal action from fronting specialist Clear Blue Insurance.
Creditors involved in the bankruptcy proceedings of Vesttoo submitted in late December claims surpassing $4.8 billion against the company and its affiliated entities. However, the anticipated amount recovered is expected to be less than $100 million.
Allegedly, former senior employees at Vesttoo illicitly generated nearly $3.36 billion in LOCs for reinsurance transactions. The board of Vesttoo, led by interim CEO Ami Barlev, is still hopeful of resurrecting the company in order to find a buyer for its technology and team.
In its first interim report filed with the Delaware court last October, Vesttoo said that its investigation identified that “pervasive and systemic misconduct” was engaged in by a limited set of Vesttoo executives and other third-parties outside of Vesttoo. According to the report, this misconduct was shielded from the majority of Vesttoo’s employees, the Board of Directors and the insurance markets. “Among the critical findings from the investigation are that a number of former Vesttoo executives, namely Yaniv Bertele, Alon Lifshitz, Udi Ginati and Josh Rurka were directly involved in creating fake documents and forging identities,” read the report prepared by financial and risk advisory firm Kroll.
