Aon has disclosed that it may be facing legal action over letters of credit (LOCs) related to the Vesttoo collateral investigation, though has noted that it has “meritorious defences” and intends to “vigorously defend itself” against these claims.
The re/insurance broker stated that “certain clients and counterparties have initiated or indicated that they may initiate legal proceedings” against it following allegations in July 2023 that fraudulent LOCs were issued in the name of third-party banks in connection with transactions for which capital was arranged by Vesttoo.
According to Aon, Vesttoo is one of the third parties that identifies capital providers to collateralise insurance and reinsurance obligations of its clients and counterparties.
The firm explained that in certain transactions in which Vesttoo identified third party capital providers to collateralise reinsurance obligations, including transactions in which it (Aon) or its affiliates provided brokerage or other services, some letters of credit from third party banks are alleged to have been fraudulent. The re/insurance broker added that it is “actively investigating” those allegations.
Aon has stated that the pending or threatened legal proceedings against it allege, among other theories of liability, that in certain circumstances, it failed to comply with its alleged duty to procure appropriate letters of credit.
Though, the firm believes that it has “meritorious defences” and intends to “vigorously defend itself against these claims and to seek recourse against third parties where appropriate.”
Aon added that certain Bermuda regulatory authorities have initiated investigations or inquiries into this matter, and other regulatory authorities could initiate investigations or proceedings against it or third parties.
