The insurance giant says it received fraudulent letters of credit from the embattled company
By Steven Byerley
Sep 01, 2023 Share
Markel Bermuda Limited (MBL) has announced that it has been appointed to the statutory committee of unsecured creditors in the Chapter 11 bankruptcy proceedings of Vesttoo Ltd and its affiliates.
MBL's involvement in this bankruptcy case stems from two collateralized reinsurance transactions it entered into using White Rock Insurance (SAC) Ltd's segregated account platform, the company said.
Under these transactions, MBL transferred collateral protection insurance risk to the segregated account owned by a Vesttoo affiliate, which, in turn, was responsible for providing reinsurance collateral to MBL, the company said.
Two letters of credit, worth $50 million and $77.75 million, respectively, were issued as collateral backstops in case claims arising from the underlying policies were not honored. Unfortunately, these letters of credit were later discovered to be fraudulent, with an affiliate of Vesttoo listed as the applicant on behalf of White Rock, and MBL designated as the beneficiary.
Vesttoo allegedly provided multiple insurers with fraudulent letters of credit amounting to up to $4 billion.
On August 14 and 15, Vesttoo and several affiliated entities filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.
Read next: Co-founders of Vesttoo speak up against “opportunistic parties”
In light of the fraudulent letters of credit, MBL said that it is actively exploring possible remedies against third parties, including Vesttoo within the context of its Chapter 11 case, to mitigate or eliminate potential losses resulting from this fraudulent activity.
MBL, a class 4 Bermuda insurer and a subsidiary of Markel Group Inc., is part of Markel's global specialty insurance operations.
Markel Group said that at present, it does not anticipate that the losses arising from the fraudulent letters of credit will have a material adverse impact on its results of operations, financial condition, or liquidity.
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- Vesttoo begins Chapter 11 proceedings to restructure
- Fronting insurance companies face ratings review following fraud claims
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