Vesttoo will lay off 75% of its staff and will shutter some Asia offices following allegations that fraudulent letters of credit (LOC) were issued in the name of third-party banks as part of transactions arranged via its platform, according to a recent report.
Vesttoo, which has around 200 staff, will close its Tokyo, Hong Kong, and Seoul offices, Reuters reported. It will maintain a presence in Tel Aviv, London, Bermuda, New York, and Dubai, according to the report.
"In order to solidify the foundation of the company and reassure the industry, leadership must return its focus to core services while reducing overall costs, including parting ways with some of our employees," Vesttoo said in statement shared with Reuters.
"These are painful, but important decisions that we must make at this time. Our focus remains on regaining our footing and emerging from this challenge stronger than before."
In the aftermath of the emergence of allegations around fraudulent LOCs, global broker Aon cautioned in a Friday SEC filing that it could face legal challenges following the debacle.
“Aon is actively evaluating the Vesttoo matter, cooperating with relevant authorities, and coordinating with other impacted third parties,” the company said in a statement to Insurance Business, shared this week.
Fronting insurance companies with significant exposure could face ratings action and a weaking of their credit profiles, ratings agencies have cautioned.
AM Best has launched reviews of collateral arrangements at rated fronting insurance companies.
Last week, Clear Blue Insurance Group’s rating was placed under review by the ratings agency, pending management’s “ability to replace certain programs and/or letters of credit to allow for proper reinsurance credit at the time of financial statement filings.”
Clear Blue had been working with start-up Vesttoo since at least 2022, under an arrangement that saw its P&C lines supplied with $1 billion worth of reinsurance capacity from capital markets investors.