Aon PLC unit White Rock Insurance (SAC) Ltd. Tuesday sued China Construction Bank Corp., alleging a former bank staff member colluded with reinsurance intermediary Vesttoo Ltd. in a “multi-billion-dollar” fraud against insurance companies.
White Rock, a Bermuda-based segregated account company involved in reinsurance transactions between cedents and Tel Aviv, Israel-based Vesttoo, alleges that cedents paid at least $140 million in premiums to Vesttoo through the White Rock accounts.
Under the reinsurance arrangements, White Rock held assets for the cedents in segregated accounts, which served as capital to pay claims, court papers say.
The transactions were purportedly fully collateralized with letters of credit that Vesttoo procured from international banks, White Rock alleges in the suit, which was filed in state court in New York by Quinn Emanuel Urquhart & Sullivan LLP.
“But in July 2023, it came to light that the issuing banks refused to honor the LOCs. Vesttoo turned out to be a total sham, sustained by over $3 billion of useless collateral. The fraud’s shockwaves were felt throughout the global insurance marketplace, and Vesttoo quickly spiraled into Chapter 11 bankruptcy,” the suit states.
Most of the LOCs were issued by CCB and its affiliates, and the bank has refused to honor more than $2.8 billion of collateral, the suit states.
CCB’s New York affiliate did not immediately respond to a request for comment.
According to White Rock, a relationship manager at CCB represented to the Aon unit, its auditors and other market participants that the LOCs were authentic.
The banker “transmitted and then verified the LOCs to White Rock, always using an official CCB email account and often using CCB (New York) to issue the LOCs. He also held meetings at a CCB office and used an authentic CCB telephone number,” court papers say.
CCB “bestowed its full faith and credit” on the banker, White Rock alleges.
The banker ceased to be affiliated with CCB when the Vesttoo scandal erupted in 2023, court papers say.
White Rock and the cells are seeking at least $140 million from CCB, suit states.
Earlier this year, insurance and home inspection software provider Porch Group sued CCB for its alleged role in the Vesttoo scandal. Previously, Porch had settled a dispute with Aon over Vesttoo.
