From: Captive Intelligence
Extra due diligence will be required from the captive market, as well as the insurance industry as whole, if it is to avoid a repeat of the Vesttoo fraud allegations.
Vesttoo is an insurtech that connects capital market participants with (re)insurance risk that has recently been embroiled in claims regarding fraudulent collateral.
Various press reports since late July 2023 have alleged claims of fraudulent letters of credit (LOCs) from a single non-US bank related to transactions that had been facilitated by Vesttoo.
LOCs are commonly used by captives to guarantee fronting programmes and the case has caught the attention of captive regulators, banks and fronting partners on both sides of the Atlantic.
Sandy Bigglestone, deputy commissioner for captive insurance at the Vermont Department of Financial Regulation, has been monitoring developments concerning Vesttoo and notified local captive managers on 26 July alerting them of “a critical risk involving the insurtech company, Vesttoo”.
In the communication, she requested companies to review all transactions to identify captive insurers that may be impacted within 30 days.