Markel Bermuda joins committee of Vesttoo creditors

Markel Bermuda (MBL) has become the latest re/insurer to be identified as a creditor in the Vesttoo scandal as it announced it had been added to the been appointed to the statutory committee of unsecured creditors in the chapter 11 bankruptcy in Delaware of Vesttoo and its affiliated companies.

Markel, which says it was presented with two fraudulent letters of credit valued at $127.75 million, joins Clear Blue Specialty Insurance, Homeowners of America Insurance, Proventus Holdings and United Automobile Insurance on the committee.

MBL said its involvement in the bankruptcy stems from the total of two collateralised reinsurance transactions it entered into utilising Aon subsidiary White Rock Insurance (SAC) 's segregated account platform for the benefit of a segregated account owned by a Vesttoo affiliate.

MBL said: “MBL ceded collateral protection insurance risk to the segregated account, which in turn was required to provide reinsurance collateral to MBL. The letters of credit were provided as collateral backstops in the event claims were made and not paid on the underlying policies for these transactions.

“These letters of credit, one for $50 million and the other for $77.75 million, were later deemed to be fraudulent.  Both letters of credit list an affiliate of Vesttoo as the applicant on behalf of White Rock, with MBL as the designated beneficiary.”

Since Vesttoo has filed to enter voluntary chapter 11 bankruptcy in Delaware, Markel said it is “exploring remedies against third parties (including Vesttoo in the context of its chapter 11 case) that may be available to MBL to mitigate or eliminate potential losses resulting from the fraudulently tendered letters of credit”.

MBL is a class 4 Bermuda insurer and a subsidiary of Markel Group Inc. Markel Group Inc. currently does not expect that losses arising from these fraudulently tendered letters of credit will have a material adverse impact on its results of operations, financial condition or liquidity.

Markel’s announcement comes as Vesttoo won an order in Delaware bankruptcy court authorising it to pay up to $3.56 million in pay and benefits to employees. This included $861,785 in employee benefit programmes, accrued and unpaid compensation of $500,000 and $1.33 million in withholding taxes and obligations.

The payment also includes termination pay of $799,758 to which some creditors had objected and an earlier order by Judge Mary Walrath had refused.

Previous court filings also revealed that the joint provisional liquidators of Vesttoo and certain White Rock SAC segregate cells, Michael Morrison and Charles Thresh of Teneo had applied under Chapter 15 of US bankruptcy laws for a stay of the Vesttoo bankruptcy proceedings and for a dscoery order to determine “whether the privately-held insurance-tech group Vesttoo, including through its directors and officers, engaged in suspicious financial dealings in connection with a purported fraud; and how the purported fraud transpired, including but not limited to under the supervision and direction of Vesttoo directors and officers.

The application confirms that White Rock SAC had received 37 letters of credit from Vesttoo. The banks from which Vesttoo purportedly procured these letters were China Construction Bank, Banco Santander, and Standard Chartered Bank USA.

The JPLs applied for discovery the banks and several Vesttoo entities; employees of the Vesttoo entities and the Truist Bank in Charlotte, North Carolina and Hong Kong-based Yu Po Holdings Limited, and Yu Po Finance Limited.