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CatX, a digital catastrophe and parametric risk exchange start-up, has announced an important hire for the company, bringing onboard experienced London-based reinsurance and retrocession broker Jon Wood to become the firm’s first Head of Origination.

CatX’s ambition is to provide a flow of risks to insurance-linked securities (ILS) investors through its digital platform.

Wood’s experience in the industry-loss warranty (ILW) space could prove beneficial here, with this being likely the main structure a platform can quickly gain traction in, given its relative lack of complexity compared to indemnity structures.

The company said, “This strategic hire underscores CatX’s commitment to broadening its market reach ahead of the upcoming January renewals, as the company targets a significant increase in transaction volume particularly in parametric, Industry Loss Warranties (ILW), and specialty reinsurance.”

Wood most recently served on the Retrocession leadership team at Aon’s Reinsurance Solutions.

At Aon, Wood helped shape and execute the broker’s global strategy, driving high-value transactions across the international reinsurance market.

Before his time at Aon, Wood held senior positions at leading reinsurance brokers Willis Re and Guy Carpenter.

Given his retrocession focus at his most recent permanent role at Aon, Wood has experience placing risks into both traditional reinsurance markets and alternative capital markets, or insurance-linked securities (ILS).

Since leaving Aon in September 2023, Wood has been consulting to European reinsurer VIG Re on retrocession and reinsurance.

Benedict Altier, Co-Founder and CEO of CatX, said on the hire, “We are thrilled to welcome Jon to the CatX team. His appointment comes at a pivotal moment, as interest from new capital sources for opportunities in the insurance space continues to grow. Jon’s leadership will be key in driving our strategy and helping us to better connect risk with new capital.”

Jon Wood, newly appointed Head of Origination, added, “CatX has created a unique digital platform to efficiently connect high-quality capital with leading (re)insurance risk. I am excited to be part of the team as we make insurance a frictionless, straightforward, and accessible asset class for investors while delivering pricing and process efficiency to brokers and insurers accessing new sources of capital.”

Lucas Schneider, Co-Founder and CTO of CatX, also said, “With over 20 years in the industry, Jon will help us to secure attractive opportunities for our funds and accelerate the flow of alternative capital into insurance. We aim to provide access not only to innovative technology, such as our AI-powered tool Catamaran, but also to leading experts in structuring and executing insurance transactions. This powerful combination allows us to deliver exceptional outcomes for investors while ensuring comprehensive risk protection.”

At CatX, Wood will be tasked with supporting reinsurance, retrocession, and global corporate broking teams to make best use of the capital available through the CatX platform, creating opportunities that align investor interests with the risk management needs of insurers and corporates.

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Aon’s segregated accounts company White Rock Insurance (SAC) Ltd. has filed a lawsuit in New York against China Construction Bank, alleging an “inside man” at the bank had represented that letters of credit (LOC) involved in the Vesttoo fraud were authentic, and claiming a minimum $140 million in damages from the bank for the losses suffered, Artemis has learned.

It’s the latest twist in the now long-running Vesttoo fraud saga and seemingly reflects Aon’s desire to be compensated, and secure compensation for its clients, for some of the financial impacts the broker and its business partners have suffered from the fall-out of the global reinsurance fraud scheme.

White Rock Insurance (SAC) Ltd., represented by Quinn Emanuel Urquhart & Sullivan, LLP, has filed the lawsuit acting in respect of itself and Segregated Accounts T-94, T-95, T-96, T-100, T-102, T-103, T-107, T-108, T-111, T-113, T-122, T-125, T-126, and T-127, court documents seen by Artemis show.

A White Rock spokesperson stated, “White Rock’s lawsuit against China Construction Bank is another step in our efforts to maximize recoveries for clients impacted by the Vesttoo fraud. China Construction Bank’s direct role in the issuance of fraudulent letters of credit enabled the fraud and the bank should be held accountable for the harm it has caused.”

The case “arises from a global, multi-billion-dollar fraudulent scheme to defraud insurance companies engaging in reinsurance transactions,” the complaint states.

Going on to explain that the cedents involved and affected by Vesttoo’s fraud had used White Rock Bermuda to transform assets into insurance or reinsurance with a licensed Bermuda-based insurance company.

The complaint states, “Vesttoo’s entire apparatus was premised on the Cedents’ confidence that the reinsurance transactions were fully collateralized by rock-solid letters of credit (“LOCs”) that Vesttoo procured from leading international banks.

“Based on those representations, the Cedents transferred to Vesttoo at least $140 million in premiums, paid into designated segregated accounts established under White Rock Bermuda’s corporate structure (the “Cells” and, together with White Rock Bermuda, “White Rock”). But in July 2023, it came to light that the issuing banks refused to honor the LOCs.

“Vesttoo turned out to be a total sham, sustained by over $3 billion of useless collateral.”

Adding that, “Vesttoo did not act alone. A recently-founded, small startup, Vesttoo had neither the credibility nor the track record required to engage in large-scale reinsurance transactions with the world’s leading insurance companies. Vesttoo’s key to this market was LOCs apparently issued by some of the world’s largest and most reputable banks, which purported to fully collateralize the reinsurance transactions. Those LOCs gave Vesttoo credibility and provided third parties with confidence that the transactions were safe and compliant with applicable Bermuda law. Without the LOCs, the parties involved—White Rock included—would have never engaged with Vesttoo.”

As we’ve reported before, China Construction Bank had been named as the issuing institution for a significant amount of the fraudulent letters of credit (LOC) from the Vesttoo case.

Of the billions of dollars in letters of credit (LOC) that should have supported the reinsurance deals involved, most were found to be forged or invalid and the majority of those were said to have come from China Construction Bank.

In total, almost $3.36 billion of standby letters of credit (LOC) are presumed to have been fraudulently created under the Vesttoo scheme and of that amount, figures Artemis had seen towards the end of 2023 suggested that $2.81 billion of these were linked to China Construction Bank, with $362.5m purportedly linked to Standard Chartered Bank and $186m to Santander.

Emails that came to light during Vesttoo’s bankruptcy case show a China Construction Bank (CCB) employee, Chun-Yin Lam, used an official bank email address to communicate with some of the Vesttoo employees accused of perpetrating the fraud

CCB employee Lam had also identified the Chinese investor implicated in the fraud, Yu Po Holdings, as a client of the bank. Remember Yu Po Holdings was the name of the supposed primary investor in reinsurance transactions involving fraudulent LOCs issued by CCB, although questions remain over whether Yu Po actually exists as an investor, or was merely a shell used for the fraud, with most saying the latter is the more likely.

The complaint from Aon’s White Rock states, “LOCs issued by or out of CCB represented more than $2.8 billion of collateral CCB now refuses to honor. It was not that Vesttoo simply used CCB’s logo on a forged document and White Rock took its word for it. Rather, an inside man at CCB—an actual CCB banker acting for CCB as a Relationship Manager—represented to White Rock, its auditors, and other market participants that the LOCs were authentic.”

Adding, “By giving Mr. Lam access to its email domain, offices, and telephone system (and then breaching its duty to supervise him), CCB bestowed its full faith and credit on Mr. Lam. By so doing, CCB caused White Rock and others to justifiably rely on Mr. Lam’s representations to their detriment.”

Interestingly, White Rock’s legal complaint also states that, “Tellingly, according to official government records, Mr. Lam’s tenure with CCB closely tracked the fraud, and he ceased to be a licensed professional affiliated with CCB in July 2023—the exact same time the Vesttoo fraud was revealed.”

Going on to note that In recent court filings in the U.S. District Court for the Southern District of New York (“S.D.N.Y.”), CCB does not deny that Mr. Lam was, in fact, a bank employee during the relevant time. And tellingly still, CCB’s Chief Risk Officer stepped down and resigned around the exact same time.”

The complaint against China Construction Bank also states that “CCB was the lifeline for the Vesttoo fraud. Without CCB, the Vesttoo fraud could not have occurred: none of the Vesttoo reinsurance transactions would have closed or survived had Mr. Lam not transmitted and confirmed the LOCs using an official CCB email account and CCB’s arm in New York—CCBNY. Mr. Lam’s acts were committed entirely under the auspices of CCB, and CCB is directly and vicariously liable for them. CCB harbored a fraudster, gave him access to a CCB email address, office, and telephone number, and then failed to deter, prevent, and detect a massive fraud committed through those channels. On multiple occasions, White Rock, its auditors, and other market participants sought to verify the LOCs, and were satisfied when an unambiguous verification came from within CCB. White Rock thus reasonably and justifiably relied on Mr. Lam’s representations made on behalf of CCB.”

Because of the fraud and the representations made that resulted in the fraudulent letters of credit (LOC) being trusted as collateral, cedents and White Rock suffered “at least hundreds of millions of dollars in damages, including the lost premium amounts, incurred claim amounts, and legal fees,” the court filing also states.

Also stating, “The Cedents and White Rock incurred astronomical losses and expenses, and White Rock was placed under regulatory supervision (from which it has now emerged). But for CCB and Mr. Lam, White Rock would have never continued to do business with Vesttoo, and would have recognized Vesttoo as a sham. CCB sustained the Vesttoo fraud from inception and is liable for Mr. Lam’s inside job, which it negligently failed to prevent and detect. White Rock therefore brings this action for fraud, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, and negligence against CCB. CCB’s acts and omissions should not go unpunished and, accordingly, White Rock Bermuda and the Cells seek damages which include, but are not limited to, the lost premium amounts paid by Cedents into the Cells totaling at least $140 million, White Rock’s legal fees, and all associated costs and damages.”

White Rock gives a number of causes of the legal action against CCB, including fraud, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, and negligence.

Going on to say that for each and all of these claims, it seeks damages to be determined at trial but in no case less than the $140 million already mentioned, as well as costs, interest, fees incurred and any further relief the New York Supreme Court deems appropriate.

As we’ve reported before, this is not the first legal action China Construction Bank is facing over the Vesttoo reinsurance collateral fraud.

Porch Group’s Homeowners of America Insurance Company (HOA) had first filed a law suit in New York against China Construction Bank Corporation over the Vesttoo reinsurance collateral fraud.

We then more recently learned that program services and fronting specialist Incline P&C Group also has an open lawsuit against China Construction Bank in the same district court, over the Vesttoo reinsurance collateral fraud.

Now, Aon, through its subsidiary White Rock, has launched this legal action against the bank, raising the pressure on it over the reinsurance fraud scandal.

It’s not a surprising turn of events, but shows again the desire of those affected by the fraud to be compensated for the significant costs they have suffered as a result of the Vesttoo executives’ fraudulent actions and Aon’s desire to see itself and clients properly compensated for the damages experienced.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

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The management of fronting specialist Clear Blue Insurance are praised for the rapid and determined response to the issues that arose when the company found itself caught up in the reinsurance letter of credit (LOC) fraud perpetrated by Vesttoo, according to rating agency KBRA.

Clear Blue’s management took decisive actions early on and KBRA sees this as both limiting the impact that could have been experienced, as well as putting Clear Blue on better footing to continue running its business effectively.

Both of which were achieved, according to KBRA’s latest rating analysis of the fronting specialist, in which it affirmed all of Clear Blue and its insurer’s ratings, putting them on a stable footing and citing the firm’s strong management, market position, capitalisation, structure and cash flow.

It’s a glowing report, but perhaps might not have been had the response to the Vesttoo fraud been less effective.

Clear Blue was particularly affected by the fraudulent letters of credit, having fronted a number of the reinsurance arrangements involved.

Recall that, Clear Blue had a significant relationship with Vesttoo and had said in 2022 it would help the insurtech deploy a billion dollars from the capital markets.

The company was far from the only major player to become embroiled in the fall-out after it emerged letters of credit were fraudulent.

But, the way Clear Blue responded to the crisis was critical, moving fast to reduce the impacts it felt after Vesttoo’s fraud was found out and coming through the experience with its business wholly intact, albeit not financially unscathed as there were definitely costs the company had to bear.

KBRA said, “During 2023, Clear Blue’s concentrated exposure to Vesttoo/China Construction Bank became a credit challenge – albeit one that the company quickly and materially addressed.

“In KBRA’s view, Clear Blue has leveraged lessons learned to strengthen ERM processes related to the use of unauthorized reinsurers and for accepting LOCs and trusts while simultaneously continuing to expand its franchise. The company is also exposed to key person risk but has been deepening its talent bench.”

Explaining one additional driver for the stable outlook for Clear Blue’s ratings, KBRA also said, “The Stable Outlook assumes that Clear Blue’s enhanced risk management procedures will serve it well, and that its reputation and market position will continue to remain intact as the Vesttoo matter recedes further into the past.”

Most importantly, KBRA explained that it believes the incident has not harmed Clear Blue’s reputation or business prospects.

“Clear Blue’s reputation and market position have remained intact post-Vesttoo with robust new business flows and a growing pipeline,” the rating agency explained.

In fact, KBRA believes that Clear Blue’s business is thriving in the wake of the Vesttoo fraud, reflecting the way the situation was dealt with effectively.

KBRA continued, “Management believes that its experience throughout the Vesttoo matter demonstrated its resiliency. In the wake of the discovery of fraudulent letters of credit, it replaced a significant amount of reinsurance in a short period of time for the current year book, while some prior year business was put in run-off. Management describes the market as responding favorably to it post-Vesttoo, as it is bringing in more and larger programs. Its pipeline remains robust.

“Additionally, the company reunderwrote its existing book of business, terminating certain programs and improving the quality of its book. A number of new programs have been added, including a federal crop program, the reinsurance panel for which includes relatively more high-quality reinsurers and less collateralized reinsurance compared with a number of its programs. Clear Blue has also enhanced processes and procedures and has supplemented enhancements with additional personnel. New hires include industry veterans in roles just below the C-Suite.”

It’s actually no surprise collateralized reinsurance participation would be lower for a crop book at this time. Crop is a line of business that many ILS managers and ILS capital providers view as less favourable, given the potential for attritional loss accumulation and weather volatility in the results of those books.

There were significant financial ramifications for Clear Blue’s management to deal with because of the Vesttoo fraud.

KBRA explained, “Beneath the headline results are various financial statement impacts related to the Vesttoo matter. Clear Blue took prompt action to replace reinsurance associated with the current year treaties where Vesttoo had provided reinsurance. Clear Blue obtained sufficient additional collateral from new reinsurers, and the replacement of the reinsurance on a significant portion of its portfolio resulted in a one-time adjustment to ceded premiums during 2023. Clear Blue did not replace the reinsurance of prior year treaties associated with Vesttoo and placed them in run-off. For the run-off business, Clear Blue recorded an allowance for credit losses. Any further loss related to this reinsurance would come through adverse development.”

Some of the moves Clear Blue had to make around the reinsurance exposure after LOCs turned out to be fraudulent resulted in a $21.1 million provision, related to prior-year Vesttoo treaties that were placed in run-off and KBRA noted this as a Schedule F penalty.

Clear Blue also made changes to its investment strategy, to ensure availability of cash it might have needed, but KBRA noted it has again extending duration to lock-in rates now that the impacts from the fraud are behind it.

The fronting company also set up a bank credit line, to support its solution to the Vesttoo matter, but that is expected to be closed once repaid, KBRA said.

The necessary moves Clear Blue had to make in response to the fraud did lift operating costs somewhat, but at the same time the company continued to invest in expanding the business and making new senior hires.

Clear Blue continued to expand its gross written premiums through 2023, continuing a growth curve that has been in effect since its formation and showing that the issues faced did not slow down its ability to attract new business.

KBRA sums up that, “The Vesttoo matter gave rise to financial, reputational, and ratings risk, and, potentially, to business model implications.

“The Vesttoo situation developed rapidly, and management responded quickly and aggressively to limit the impact. Management successfully implemented solutions that addressed its market position and reputation.”

One additional point of note, Clear Blue’s majority owner, investment firm Pine Brook, has been reported to have looked to sell its position in the fronting specialist in recent years, although has not yet found a deal that made it want to offload its stake.

But, when the Vesttoo fraud hit, the majority owner doubled-down and backed its investment, making an additional $10 million private equity investment in Clear Blue as part of the solution to the Vesttoo matter, KBRA explained.

That speaks volumes, as Pine Brook is a sophisticated investor and will have understood that Clear Blue’s management could pull the company through the challenges posed by the Vesttoo fraud.

It seems that proved a safe bet to make, given the glowing report and details of the actions taken and the way Clear Blue responded decisively.

Finally, Clear Blue remains in a court process with insurance and reinsurance broker Aon, having sued that company over the Vesttoo fraud transactions, accusing Aon of soliciting the fronting specialist’s involvement in a scheme it said was structured and masterminded by the broker.

Aon fired back and said the lawsuit was an attempt to distract from the depth of Clear Blue’s involvement with Vesttoo and its own financial distress.

The rating report would seem to suggest that Clear Blue is not in any financial distress now, but it has faced relatively significant costs and it’s no surprise the company continues to look for an avenue to recover some of that.

The latest in this lawsuit is that a law firm representing Aon plc and Aon Insurance Managers (Bermuda) Ltd. has called for the judge to give the opportunity for oral argument to be heard in the case.

Saying, “We believe that oral argument will substantially assist the Court in understanding and deciding the issues presented in this action. As this Court has not yet had the opportunity to hear any argument on the legal issues presented by the pending Motion to Dismiss, we believe that oral argument will helpful in elucidating the crucial issues raised in the motion.”

At this time there hasn’t been a response to that, but it will be interesting to see whether speaking can lead to mediating and potential resolution, or whether the arguments become even more vocal when not written down.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

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A pair of lawsuits that allege China Construction Bank staff were complicit in the reinsurance collateral fraud perpetrated by executives at Vesttoo could now be combined, as the Southern District of New York court looks to save time and conserve judicial resources.

The Vesttoo letter of credit (LOC) fraud scandal continues to create litigation costs for the parties involved and we’ve now learned of another ongoing case in the Southern District of New York, as well as the fact the outstanding lawsuits against China Construction Bank may now be brought together.

As we’d reported before, Porch Group’s Homeowners of America Insurance Company (HOA) had filed a law suit in New York against China Construction Bank Corporation over the Vesttoo reinsurance collateral fraud.

Porch accused the massive Chinese bank of “enabling its personnel to perpetrate a colossal fraud” on the plaintiffs.

China Construction Bank had been named as the issuing institution for a significant amount of the fraudulent letters of credit (LOC) from the Vesttoo case.

As a reminder, of the billions of dollars in letters of credit (LOC) that should have supported the reinsurance deals involving Vesttoo, most were found to be forged or invalid and the majority of those were purported to have come from China Construction Bank.

In total, almost $3.36 billion of standby letters of credit (LOC) are presumed to have been fraudulently created under the Vesttoo scheme.

Of these, figures Artemis had seen towards the end of 2023 suggested that $2.81 billion of these were linked to China Construction Bank, with $362.5m purportedly linked to Standard Chartered Bank and $186m to Santander.

During the bankruptcy of Vesttoo, it came to light that emails show a China Construction Bank (CCB) employee, Chun-Yin Lam, used an official bank email address to communicate with some of the Vesttoo employees accused of perpetrating the fraud, including co-founders Yaniv Bertele and Alon Lifshitz, as well as capital finder Udi Ginati.

CCB employee Lam had also identified the Chinese investor implicated in the fraud, Yu Po Holdings, as a client of the bank. Recall that Yu Po Holdings was the primary investor in reinsurance transactions involving fraudulent LOCs issued by CCB, although questions remain over whether Yu Po actually exists as an investor, or was merely a shell used for the fraud, with most saying the latter is the more likely.

Now, we’ve learned that program services and fronting specialist Incline P&C Group also has an open lawsuit against China Construction Bank in the same district court, over the Vesttoo reinsurance collateral fraud.

Incline P&C Group entities are seeking damages from China Construction Bank for much the same reasons as Porch Group, alleging that several letters of credit (LOCs) each “constituted a valid and enforceable contract” between their insurance entities and CCB, so they seek breach of contract damages .

The LOCs affecting Incline P&C linked reinsurance deals, each of which were among those fraudulently created during the Vesttoo fraud it seems, have been collectively valued at more than $43 million.

In both cases, China Construction Bank has sought to have the case dismissed, claiming the New York court does not have jurisdiction over it, but the plaintiffs are persisting and have rejected the attempt to dismiss the lawsuits, leading to a proposal to combine the cases, we understand.

Now, the parties involved have been given seven days to object to the pre-trial consolidation of the cases against China Construction Bank.

As the cases appear to be following a similar pattern of calls for dismissal and updated complaints, while the ultimate grievance is the same, it perhaps makes sense to save judicial time and bring the actions together.

So, Incline P&C emerges as another company seeking to be compensated for the damage it suffered as a result of the Vesttoo reinsurance collateral fraud, joining others seeking to hold to account companies linked to the fraud that occurred.

The costs of legal action related to the Vesttoo scandal continue to rise at the same time.

How successful attempts to get recoveries from the defendants in these various Vesttoo-linked court cases will be remains to be seen, while the still conspicuously absent criminal case remains just that.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

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Porch Group, the owner of insurer Homeowners of America Insurance Company (HOA) which was impacted by the Vesttoo reinsurance letter of credit (LOC) collateral fraud, has responded to broker Gallagher’s motion to dismiss the legal case Porch had raised, saying it believes the company failed to satisfy the obligations of their contract.

Porch has agreed with the motion to dismiss its complaint against parent Arthur J Gallagher, but persists with its complaint against reinsurance broking arm Gallagher Re.

To recap for you, in May we reported that Porch Group had launched a lawsuit against broker AJG and its Gallagher Re unit, claiming the administration of reinsurance related to a transaction that was impacted by the Vesttoo letter of credit (LOC) collateral fraud had been “grossly mismanaged”.

Prior to that case being launched, Porch had already entered into settlements related to the Vesttoo fraud with a number of parties, as it had been one of the cedents most affected by the collateral turning out to be forged.

The Vesttoo fraud saw the use of reinsurance collateral promises from the insurtech, backed by fraudulent letters of credit (LOC) that turned out to have been forged, lacking substance and had no real backing from capital providers and the investors supposedly behind them are thought to be non-existent.

As a result, cedents such as Porch have in some cases turned to the reinsurance broker’s behind deals that involved Vesttoo, as they looked to secure financial compensation for the damages incurred due to the fraud.

Porch has already agreed a $30 million strategic arrangement with Aon, that included releasing all claims related to the Vesttoo fraud that it had against the broker, and it filed a separate and ongoing lawsuit against China Construction Bank.

As we later reported, Gallagher responded to the lawsuit and complaint made by Porch, urging the Texas court, where the lawsuit was filed, to dismiss the petition “in its entirety and with prejudice.”

Gallagher noted that AJG was not a party to the reinsurance contract in question, which Porch has now agreed to in dropping the parent from the lawsuit.

But the reinsurance broker also claimed Porch’s lawsuit failed to state a claim, and fell “well short of the plausibility threshold,” while stating that reinsurance contract language backs up Gallagher, not the plaintiff.

Gallagher Re was not obliged to seek evidence that China Construction Bank, the bank named on the fraudulent letter of credit, had agreed to assume the risk related to the funding of the reinsurance agreement, the broker stated.

Which Porch has now responded to.

Porch said, in objecting to Gallagher’s motion to dismiss the case, that, “Gallagher failed to satisfy its most basic obligations under the parties’ contract. After Gallagher collected millions of dollars in fees from HOA and assured HOA that it had reinsurance backed by a valid letter of credit for over $200 million, HOA discovered the purported reinsurance was completely illusory.

“In breach of multiple contractual obligations, Gallagher had failed to verify— or conduct any reasonable due diligence into—the validity of the letter of credit. For years, it had ignored red flags suggesting something was amiss. As a result, Gallagher was apparently clueless as to the truth: that there was no money to back up the reinsurance policy. Put differently, there was no reinsurance at all.”

Urging the court to deny Gallagher’s motion to dismiss in full, Porch said that its subsidiary HOA had adequately stated three breaches of contract by the reinsurance broker.

The first being that Gallagher Re failed to obtain written confirmation from China Construction Bank (CCB), as an “assuming reinsurer,” of its agreement to assume the reinsurance risk in question, breaching section 5 of the contract between the parties.

The second alleged breach is of section 11 of that contract, where Porch claims Gallagher violated its duties as a reinsurance broker under Texas common law and the Texas Insurance Code, notwithstanding its obligation to “[c]omply with U.S.” law and “any other applicable economic . . . laws.”

Porch also claims a breach of contract section 13, which required Gallagher to provide reinsurance servicing duties, including administering all reserve funding. But Porch states that, “Far from administering the reserve funding for HOA’s reinsurance in a customarily diligent manner, Gallagher assured HOA it could allow $25 million of HOA’s money to leave its segregated reinsurance account because there was a valid letter of credit in place to fully fund the account—when there was no letter of credit at all.”

Porch goes on to say that, even if there were a basis for “Gallagher’s self-serving interpretations of these provisions,” that “the only conclusion the Court could then draw would be that the contract’s language is ambiguous and the parties’ intent must be determined by a factfinder.”

A separate argument made by Gallagher, that the case should be dismissed because the source of the fraud Vesttoo and the bank named on forged letters of credit, China Construction Bank, are necessary parties to it “fails at the starting gate.”

Porch claims that this is a breach of contract case, between it and Gallagher and that Vesttoo and CCB were not parties to that contract.

“It is Gallagher—not any third parties—who earned millions of dollars from a contract that it serially breached,” Porch asserts.

Gallagher had also said that, without the joining of these other parties to the lawsuit, Porch could feasibly “double” the recoveries the plaintiff receives, if its legal actions were successful.

On that and the fact the company has other legal action ongoing, against CCB in a New York court and its participation in Vesttoo’s bankruptcy case, Porch states that, “Gallagher will not incur any obligations as a result of the Vesttoo bankruptcy case or the suit against CCB in S.D.N.Y.; it is not a party to either and its contractual obligations to HOA feature nowhere in those cases. Nor is there is any risk that Porch will earn a double recovery. Should Porch recover damages in other proceedings that it seeks to recover from Gallagher prior to entry of judgment in this case, it would simply reduce HOA’s recoverable damages here.”

For these reasons, Porch says the court should deny Gallagher’s motion to dismiss the case in full.

The complexity of the Vesttoo legal proceedings remains evident and the costs to all sides involved continue to mount.

Still, no sign of any criminal proceedings have emerged in relation to the significant loss of value across multiple parties in the reinsurance chain due to the fraud. Nor have any other legal cases been launched, that we know of, against other parties or facilitators to the Vesttoo-linked reinsurance transactions in question.

These cases look set to run and the courts have a challenging job ahead of them. And, as we’ve said multiple times, it remains to be seen how successful legal actions will be, when the damages and financial costs incurred due to the letter of credit (LOC) fraud have spread so widely and blame is not easily assigned, outside of to the fraudsters themselves.

Read all of our coverage of the alleged fraudulent or forged letter-of-credit (LOC) collateral linked to Vesttoo deals.

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Oxbridge Re Ltd., the Cayman Islands based reinsurance company, has announced the successful raising of $2.88 million for its sidecar structure through EpsilonCat Re tokenized reinsurance securities issued by its subsidiary SurancePlus Inc.

Oxbridge Re launched Web3 subsidiary SurancePlus in 2022, with a plan to issue tokenized reinsurance securities using the Avalanche blockchain.

Those tokenized reinsurance securities effectively provide funding to support the firm’s collateralized reinsurance sidecar vehicle Oxbridge Re NS.

The reinsurer raised $2.4 million through the sale of the first series of digital or tokenized reinsurance securities, which were named DeltaCat Re last year.

That $2.4 million of capital was used to support collateralized reinsurance contracts, underwritten via its sidecar structure, Oxbridge Re NS.

The company later reported that the DeltaCat Re series of tokenized reinsurance sidecar securities realised a 49% return for the investors backing them, surpassing both initial and updated expectations.

Earlier this year, the company announced it was beginning its second reinsurance sidecar capital raise through the sale of up to $10 million of EpsilonCat Re tokenized reinsurance securities.

Now, Oxbridge Re has reported raising $2.88 million for the EpsilonCat Re tokenized reinsurance securities issuance, so a little below its projection.

SurancePlus Inc., the digital securities subsidiary of Oxbridge, has completed a private placement of 287,705 Participation Shares represented by the digital tokens, EpsilonCat Re, under a 3-year Participation Share Investment Contract to raise this roughly $2.88 million.

For this latest set of digital reinsurance securities, Oxbridge Re said that the targeted return will be 42%.

The company said the strong 49% return from the previous DeltaCat Re issuance “underscores the potential of digital innovations in reinsurance and sets a positive precedent for future offerings like the EpsilonCat Re token.”

The EpsilonCat Re Tokens were sold to accredited investors in the United States under Rule 506(c) of Regulation D and to non-US investors pursuant to Regulation S of the US Securities Act 1933, as amended.

In addition today, Oxbridge Re announced that subsidiary SurancePlus has signed a partnership agreement with digital asset management specialist Zoniqx, who itself has announced a partnership with Ripple and PwC as part of their Tokenization & Digital Assets Scale program.

“This collaboration aims to further expand the footprint of SurancePlus as it revolutionizes the reinsurance industry by leveraging blockchain technology to tokenize reinsurance contracts and facilitate their deployment on blockchain ecosystems,” the company explained.

Jay Madhu, President and CEO of Oxbridge Re, said, “Last year, SurancePlus incorporated digital innovations and Web3 insights, democratizing access to reinsurance as an alternative investment. We believe we were the first publicly traded company to raise capital for catastrophe reinsurance risks through the sale of tokenized reinsurance securities.

“Building on that success, we are delighted to have partnered with Zoniqx and we believe their state-of-the-art tokenization and digital asset lifecycle management offerings will also further enhance our RWA Tokenization and Web-3 capabilities. We have also closed our 2024 EpsilonCat Re offering and are targeting returns of approximately 42%’’.

Co-Founder and CBO of Zoniqx, Sanjeev Birari, added, “This collaboration with Oxbridge Re and SurancePlus marks a significant milestone in advancing RWA tokenization. By leveraging our state-of-the-art TALM system and the DyCIST protocol, we are showcasing the reliability and versatility of our asset-agnostic technology in the reinsurance industry. Partnering with a listed NASDAQ company like Oxbridge Re speaks volumes about the robustness of our solutions. This partnership enhances transparency, security, and efficiency in the tokenization of reinsurance securities, validating our vision and unlocking new opportunities for investors. We’re thrilled to bridge traditional finance with digital ecosystems, reshaping the future of digital asset management and driving accessibility in financial markets.”

As we recently reported, a new ILS focused investment manager named Members Capital Management Ltd. is launching with a mission to (re)diversify sources of reinsurance capital using digital and tokenized assets.

The strategy of leveraging digital asset technology and architecture to facilitate fractionalised investments into reinsurance-linked securities is gaining traction, it seems.

It is an intriguing way to both modernise the matching of capital with insurance risk and also tap into differentiated sources of funding for ILS strategies.

Finally, as we had also reported earlier this year, Oxbridge Re announced that it is considering “strategic alternatives” for the business, including a potential sale or merger, various capital actions, or even spinning out its tokenized reinsurance investments unit.

View details of many reinsurance sidecar transactions in our directory.

Oxbridge Re raises $2.88m for EpsilonCat Re tokenized reinsurance sidecar securities was published by: www.Artemis.bm
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A new Bermuda-based asset manager has emerged named Members Capital Management Limited with well-known insurance-linked securities (ILS) industry executive Ben Fox in the Chief Investment Officer role and a mission to (re)diversify sources of reinsurance capital using digital and tokenized assets.

Members Capital Management Limited has been licensed and is authorised and regulated by the Bermuda Monetary Authority and seeks to “provide greater access to institutional-grade investment opportunities while meeting the needs of a prosperous future,” the firm’s LinkedIn page states.

Lloyd Wahed, an executive with a record of scaling regulated asset managers, fintech companies, and digital asset enterprises is Members Capital CEO, Co-Founder & Managing Partner.

Wahed has a background in fintech and a range of digital asset venture companies and has also been an advisor at Nayms, a fully-regulated marketplace for on-chain insurance that provides cover for digital asset-related risk, leveraging blockchain and smart contract technologies to deliver a platform for the trading of digital insurance-linked securities (ILS).

Patrick Barrett is COO and also a Co-Founder at Members Capital Management, coming with a track record in cross-border deal-making, business growth, and investor solutions, with a Partner level legal background, as well as venture and fintech investing.

Ben Fox, most recently Head of Strategy and Risk at Hiscox ILS, but also with a background that includes ILS investing at Ontario Teachers’​ Pension Plan and working as a financial specialist with a focus on catastrophe bonds, ILS and disaster risk financing at the World Bank, has taken the Chief Investment Officer (CIO) role at this startup asset manager.

Jeremy Williams, a compliance and security expert with a background in the AML and financial crime functions of HSBC Global Banking and Danske Bank, and as the global head of KYC at Wise (formerly Transferwise), is Members Capital Management’s Head of Compliance.

The goal of Members Capital Management, according to the firm’s new website, is to “unlock new sources of capital by bridging digital and tokenized assets into reinsurance.”

The aim is to deliver attractive risk-adjusted returns that are uncorrelated, as is the mandate of ILS and reinsurance capital investment managers, with a focus on diversified sources of return, generated via effective risk modelling and allocation strategies.

The firm will target well-understood, well-priced, and well-structured areas of the ILS market, the company says, to provide access to institutional-grade investment opportunities “while meeting the needs of a prosperous future.”

The technology and on-chain focus is clear, with partnerships established with digital asset specialist Coinbase, insurance manager and fiduciary service provider Apex Group, and Nayms, the aforementioned on-chain risk transfer market specialist.

Strategic details beyond the initial marketing materials that have become available are not currently known, but we understand an official launch is coming soon and look forward to understanding more on the new venture.

Breaking ground in ILS with the use of digital asset technology and infrastructure, as well perhaps as capital currently stored in digital assets, has often been discussed in our coverage over the years.

But a concerted effort to leverage these techniques to offer diversifying ILS and reinsurance investment opportunities has yet to emerge, to-date, so this will be an interesting new venture to follow.

Members Capital emerges to (re)diversify ILS capital with Ben Fox as CIO was published by: www.Artemis.bm
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Schroders Capital, the private markets business of Schroders Group and manager of around $5 billion of insurance-linked securities (ILS) assets, has collaborated with German reinsurance firm Hannover Re on a pilot tokenisation project, designed to enhance the way ILS assets are invested and managed.

Working alongside Hannover Re, the initiative has been tested by Schroders on an internal-only basis and successfully enabled reinsurance contracts to be tokenised and traded on a public blockchain platform using smart contracts.

Each token represents a share in a portfolio of reinsurance contracts, which the asset manager says shows how ILS funds may invest via a digitalised investment infrastructure and eco-system in the future.

The process of tokenising these reinsurance or ILS contracts has, with the consistent oversight of investment professionals, allowed a number of time-consuming processes to be automated, Schroders noted.

As an example, the pilot group could streamline the investment process by automating subscriptions and reducing settlement times as well.

In addition, by integrating key catastrophe insurance data sources into the smart contracts, Schroders said that payments to the appropriate recipient could be automatically triggered, if qualifying natural disaster events occurred, such as US hurricanes or earthquakes, or European windstorms.

This is one of the areas that smart contracts and so-called oracles can come into their own, in the automated use of verified data to trigger or activate contracts. These are most readily applicable to parametric structures, including industry-loss triggers, but there is also relevance for indemnity, as verified proof of ultimate net loss could be a data point that would apply to a smart contract and checked against pre-defined attachment and exhaustion points. In this case we’re told industry-loss indices were used for this pilot.

Stephan Ruoff, Co-Head of Private Debt and Credit Alternatives, Schroders Capital, commented, “The success of this pilot showcases the immense potential for enhancing transparency, streamlining investment processes and improving client experience in the reinsurance sector. It paves the way for a more interconnected and efficient digital ecosystem, and we are looking forward to exploring the broader application to wider investment scenarios and clients.”

Henning Ludolphs, Managing Director Retrocession & Capital Markets, Hannover Re, added, “This proof of concept was a great opportunity to understand the capabilities of blockchain technology when applied to the reinsurance market. With strong governance and embedded compliance in place, the pilot also showed that the regulatory and operational risks around blockchain are similar to those of other market transactions. While this is an emerging technology, we anticipate more appetite for blockchain-enabled investments in the future, and this pilot prepares us well to evolve our approach to generate further retrocession capacity via a different source.”

Schroders Capital also said that the tokenised ILS pilot project demonstrated the possibility of an improved client experience, enhancing accessibility of ILS assets by allowing tokens to be held in investors’ own digital wallets alongside their other digital investments.

As well, the fact the pilot used a public blockchain has also enhanced transparency, while still allowing appropriate governance and controls to be applied, with every step having consistent oversight from investment professionals.

This tokenised ILS pilot project builds on Schroders Group’s commitment to innovation and leadership in digital assets, having joined the Monetary Authority of Singapore’s Project Guardian last year, and participating in the first ever GBP Digital Bond issued by the European Investment Bank.

This tokenised ILS project was a result of over one year of collaboration between Schroders, Hannover Re and the i.AM Innovation Lab, under the oversight of the Guernsey Financial Services Commission (GFSC).

Schroders Capital also said that it will use the findings of this proof of concept to explore further tokenisation opportunities in the reinsurance market.

It’s great to see such large names behind an innovative project like this, as the digitalisation of risk, capital and data flows in insurance-linked securities (ILS) is something we’ve been passionate about for a couple of decades now.

Back in 2016 we wrote about the potential for use of blockchain technology, including oracles and smart contracts for digitalised contracts and automated payouts.

We explained then in 2018 that more use-cases were likely to emerge, as blockchain, or smart contract technology matured and the insurance-linked securities (ILS) market become more comfortable with it.

There was a pilot blockchain catastrophe risk trading initiative by Nephila and Allianz in 2016, and as long ago as 2017 the first issuance and secondary private cat bond trade occurred on a blockchain as well.

It’s taken a long time to get greater institutional acceptance, but tokenisation and the digitalisation of financial and physical assets, using smart contracts and blockchain tech, is now gaining much broader recognition.

It’s great to see institutional names like Schroders and reinsurance names like Hannover Re pushing forward the innovation envelope, as efficiency and transparency, as well as improved user experience, can only help to enhance the ILS markets ability to grow and provide improved services and more responsive risk transfer.

Schroders Capital & Hannover Re collaborate on tokenised ILS pilot was published by: www.Artemis.bm
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Descartes Underwriting, the parametric insurance and data-driven risk transfer specialist managing general agency (MGA) and insurer, has announced a re-organisation of some of its top executive team, as it sets out a platform for accelerated growth.

The data-driven parametric insurance and risk transfer specialist has also added new offices in the United States, to expand its presence in that key market, and is planning an ambitious hiring spree to take it from more than 200 employees to over 300 within a year.

The company has been growing steadily and now aims to accelerate that, having recently said it would expand its offering of parametric insurance and data-driven risk transfer solutions beyond natural catastrophe, weather and climate risks.

Key to any growth company in the insurance and reinsurance space is a strong leadership team and structure.

To that end, Descartes Underwriting is setting out a structure to support growth and a expanding team.

Tanguy Touffut, Co-founder and Chief Executive Officer, will continue to be responsible for the overall management of critical functions (operations, finance, strategy, human resources, and marketing & communications), and will focus on the drivers of future growth for the parametric specialist.

Sébastien Piguet, Co-founder and former Chief Underwriting Officer, has now been named Chief Insurance Officer of Descartes Underwriting.

In that role, Piquet will oversee the business development and underwriting teams, with a remit to accelerate the profitable growth of the parametric portfolio

As part of this, Piguet will leave his position as CEO of Descartes Insurance, the group’s insurance company.

Kevin Dedieu, Co-founder and former Chief R&D Officer, has been named Chief Scientific Officer of Descartes Underwriting, taking responsibility for all technology functions.

He will be charged with accelerating the implementation of additional artificial intelligence (AI) functionality in areas such as climate analysis and risk assessment.

On top of this, Dedieu will become Chief Executive Officer of Descartes Insurance, subject to regulatory confirmation.

Violaine Raybaud will remain as Chief Operating Officer of Descartes Underwriting, but also take on the role of Deputy CEO of Descartes Insurance, subject to regulatory approval.

Daniel Vetter, Descartes’ current Head of North America, will become the Head of the Americas, to additionally oversee operations in Latin America for the company.

The restructured leadership team will be supported by a number of new Heads of Departments.

Marie Chabal Filleteau is named Chief People Officer, effective August 26th 2024, following 4 years at Doctolib and more than 10 at consultancy BCG.

Eric Allombert has been appointed interim Chief Marketing & Communication Officer and brings four years experience as Marketing and Sales Director at AXA Partners, and five years at Wakam.

Matthew James is appointed Commercial Director, UK & Ireland, a previously announced move.

Louis Bollaert, the former Chief Revenue Officer is set to leave Descartes to take up a management position in the insurance broking sector.

Descartes has also launched new offices in Scottsdale, Arizona and Richmond, Virginia, to strengthen its US proposition.

This adds to a physical presence in LA and New York, plus Charlotte NC, Chicago IL, Denver CO, and Little Rock AK, bringing Descartes’ global footprint to 16 offices world-wide, including Europe, Asia, and Oceania.

Tanguy Touffut, co-founder and CEO of Descartes, commented, “Strengthening our presence in the United States is essential for the development of our Group and for consolidating our position as the world leader in parametric insurance. It will enable us to respond more effectively to the local needs of our broker partners, who are confronted with an increasing frequency of climatic and emerging risks.”

Parametric specialist Descartes re-orgs top team to accelerate growth was published by: www.Artemis.bm
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CatX, a digital catastrophe and parametric risk exchange start-up, has announced that James Robinson, a Bermuda-based technology expert who previously worked in data science at re/insurer Hamilton, has been appointed to the CatX Bermuda board.

Robinson has joined the CatX Bermuda Board of Directors and the company said this further signifies its “commitment to Bermuda as a strategic hub for its operations.”

“The company recognizes Bermuda’s robust regulatory environment, innovative insurance ecosystem, and concentration of industry expertise as key advantages in supporting its global growth ambitions,” CatX explained.

James Robinson has more than two decades of experience in insurance, reinsurance, finance, and technology.

He founded Bermuda-based insurance software company Cactus Ltd., prior to which he held key positions at insurance and reinsurance group Hamilton, including as a software developer and latterly as a data scientist.

At Hamilton, Robinson worked on the design and development of cutting-edge insurance software solutions.

In the past he has also worked in software and quantitative development roles at Barclays Wealth and Capital.

CatX said his appointment will further develop its technological propositions, in particular Robinson’s expertise in developing world-class, scalable insurance and financial platforms.

The company also said it wants to expand its parametric insurance offerings, something that bringing onboard more technical and domain knowledge will no doubt assist with.

James Robinson commented on his appointment to the CatX Bermuda Board, “I am thrilled to join the Bermuda Board of CatX and support visionary founders like Lucas and Ben. Their substantial progress in automating parametric and ILS risk placement is setting a new standard in the industry. It’s an exciting time to be part of such an innovative endeavour and a huge endorsement of Bermuda’s regulatory environment for YC and Lloyd’s Lab alumni to expand their operations here.”

“We are delighted to welcome James Robinson to our Bermuda Board,” said Benedict Altier, CEO of CatX. “Technology is at the heart of our proposition to better connect new institutional investors with opportunities in insurance, reinsurance and retrocession.

“The challenge of expanding capital deployment into insurance opportunities requires new infrastructure to structure insurance data, offer understandable and accessible risk modelling and ensure confidence in collateral.”

Lucas Schneider, CTO of CatX, added, “James has been invaluable for CatX from the very beginning. His introductions to key industry players and insightful advice have been instrumental in shaping our strategic direction. We are excited to have him formally join our Bermuda Board of Directors and I am excited to work closely with him to establish ourselves as a key market for parametric and ILW opportunities by offering more competitive pricing and enhanced efficiency.”

CatX appoints tech-focused Bermuda board member, to expand parametric offering was published by: www.Artemis.bm
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