Aon faces lawsuit over alleged role in Vesttoo collapse

A civil lawsuit has been filed against insurance broker Aon, accusing the company of contributing to the downfall of the once billion-dollar-valued Israeli insurance start-up Vesttoo.

Vesttoo ran a marketplace connecting insurers with investors for trading insurance-linked securities.

Vesttoo filed for bankruptcy in 2023 after it was revealed that insurance policies sold on its platform were supported by allegedly fraudulent letters of credit.

The suit, which was unsealed in Delaware bankruptcy court, alleges that Aon “ignored red flags” and encouraged business partnerships despite internal doubts regarding Vesttoo's operations.

The complaint, brought forward by trustee Lawrence Hirsh, who is tasked with recovering funds for Vesttoo's creditors, suggests that Aon's actions were instrumental in the start-up's collapse.

The lawsuit centres on Aon's Collateral Protection Insurance (CPI) product, which was designed to insure lenders against losses if a borrower's asset liquidation failed to cover debts.

According to the lawsuit, the product's success hinged on securing reinsurance, for which Aon allegedly depended heavily on Vesttoo's ability to attract capital market investors.

The complaint also implicates other entities including China Construction Bank Corp. (CCB), whose former employee is accused of collaborating with Vesttoo insiders to generate fraudulent letters of credit.

Aon's subsidiary, White Rock Insurance, had previously secured a temporary restraining order against Vesttoo and reported suspicions of fraudulent letters of credit to Bermuda’s financial regulator in 2023.

In response to the lawsuit, Aon has emphasised Vesttoo's own admission of executive-level fraud in an investigative report and has stated that the company's executives, along with other co-conspirators, deliberately sought to deceive Aon and other affected parties.

Aon has responded to the allegations, describing the lawsuit as "a perverse attempt by Vesttoo’s bankruptcy estate to shift responsibility for Vesttoo’s deliberate fraud to Aon, one of the fraud’s biggest victims.

“Vesttoo has already acknowledged in its own investigative report that executives of the company, along with other co-conspirators, were responsible for the fraud and intentionally sought to mislead Aon and other impacted parties. We will vigorously defend Aon against these meritless claims," reported the Financial Times.

Representatives for CCB, which is also involved in a separate civil lawsuit filed by White Rock, have yet to comment on the current allegations.

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Court documents from CCB have previously described the implicated former employee as a "low-level" staff member in Hong Kong lacking the authority to issue the letters of credit in question.

"Aon faces lawsuit over alleged role in Vesttoo collapse " was originally created and published by Life Insurance International, a GlobalData owned brand.

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