Corinthian Group, the specialty non-catastrophe focused collateralized P&C reinsurance firm, has said that it could take quite some time to resolve any criminal investigation into the Vesttoo collateral issue, and that while the exact details surrounding allegedly fraudulent letters of credit (LOC) remains unclear, the firm is operating under the assumption that all Vesttoo-sourced LOCs are fraudulent.
As the investigation into allegedly forged LOCs issued by China Construction Bank (CCB) to insurers for reinsurance transactions sourced by insurtech Vesttoo continues, Corinthian shared a statement with our sister publication Artemis in which it addresses the issue.
“Like most others in the industry, the Corinthian team was incredibly surprised and disturbed by these allegations. Because Vesttoo has historically been a notable source of financial capacity for reinsurance programs facilitated through a Corinthian vehicle, the Corinthian team has immediately undertaken its own, ongoing investigation to (i) verify the veracity of these allegations, and (ii) evaluate the potential impact on programs operated through a Corinthian vehicle,” reads the statement.
Corinthian adds that its representatives have contacted law enforcement authorities to ensure that they are “simultaneously investigating this alleged wrongdoing.”
The statement goes on to stress that while the bank in question, through its counsel, has indicated that some or all LOCs are invalid, “it nevertheless remains unclear whether (i) CCB may still have some financial responsibility for the LOCs depending on exactly what occurred with respect to their issuance, or (ii) Vesttoo separately maintains sufficient financial capacity or other means to satisfy its contractual obligations to the Corinthian vehicles that sourced collateral capacity through Vesttoo.”
The collateralized reinsurer adds that until the investigation is finished, and questions have been answered, it’s not possible to determine the exact impact on the distinct Corinthian vehicles and the carrier partners.
“However, because of the size and sophistication of this alleged fraud, it will potentially take several months to complete the investigation and fully resolve the open questions. Accordingly, in order to best protect the relevant interests involved, Corinthian is operating under the assumption that all Vesttoo-sourced LOCs are fraudulent. While operating under that assumption, the Corinthian team has been working closely with its carrier and producer partners to quickly identify and implement collateral capacity to replace the Vesttoo-sourced LOCs,” states the firm.
Adding: “Corinthian has spent years developing its reputation as an upstanding and industry-leading player in the collateralized reinsurance market and despite being one of many victims of this unprecedented alleged fraud, it is committed to doing everything it can to mitigate the adverse impact of such alleged fraud on Corinthian, its reinsurance vehicles, its partners and the reinsurance industry as a whole.”
The statement from Corinthian comes after fronting and program specialist, Clear Blue Insurance Group, said that it has already secured replacement for more than 50% of the affected reinsurance programs, in response to allegations of fraudulent collateral issues at Vesttoo.
