Aon faces legal action over Vesttoo
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Aon PLC disclosed in a stock market filing Friday that clients are taking legal action against the brokerage over transactions involving allegedly fraudulent letters of credit related to online reinsurance brokerage Vesttoo Ltd.
In its 10Q filing with the Securities and Exchange Commission detailing its second-quarter results, Aon said clients and counterparties have initiated or indicated they may initiate legal proceedings against Aon.
“The pending or threatened legal proceedings against the company allege, among other theories of liability, that in certain circumstances the company failed to comply with its alleged duty to procure appropriate letters of credit,” Aon said in the filing.
Tel Aviv, Israel-based Vesttoo previously acknowledged “inconsistencies” in its operations. The company connects cedents with investors for noncatastrophe insurance-linked securities and collateralized reinsurance coverage. Some LOCs provided through a Chinese bank to support Vesttoo’s transactions were allegedly fraudulent.
Answering analysts’ questions on its earnings call Friday, Aon executives said the brokerage works with many parties that bring capital to the market and some of them use LOCs.
In the 10K Aon said Vesttoo is one of the third parties it works with to collateralize insurance and reinsurance obligations of its clients and counterparties.
“In certain transactions in which Vesttoo identified third party capital providers to collateralize reinsurance obligations, including transactions in which the company or its affiliates provided brokerage or other services, some letters of credit from third party banks are alleged to have been fraudulent,” the filing states.
Aon said it is investigating the allegations.
