Vesttoo execs quit ahead of investigation into misstated collateral

Vesttoo, an Israeli-based insurtech company with offices in Bermuda and around the world, has launched an internal audit after it was alleged that collateral put up for reinsurance had been misstated in two separate transactions. 

A company spokesperson for Vesttoo said inconsistencies in the collateral provided by banks in two transactions for which Vesttoo modelled the risk had been discovered.  

The spokesperson added: “We take the integrity of our business very seriously and are conducting a comprehensive third-party audit to ensure our due diligence processes continue to be robust.  

“We would like to emphasise that we are actively working with our clients and all organisations involved to provide full transparency in this matter and find alternative solutions as soon as possible. 

“We want to be clear that Vesttoo did not knowingly participate in any fraudulent acts and there is no evidence of such acts. The collateral in question relates to letters of credit provided under two specific transactions and were not issued by Vesttoo. 

“A few members of the leadership team have decided not to wait for the results of the audit and have decided to leave, and we respect their decision. We wish them all the best in their future endeavours.” 

Israeli business newspaper Globes said a third-party law firm had been retained to carry out the audit, which was being led by directors of the company. The directors include Pasha Romanovski of Hanaco Ventures and Chris Gottschalk of Mouro Capital.

It said the investigation could take several days. 

Vesttoo, which describes itself as a technology-driven collateralised reinsurance provider, was valued at more than $1 billion after it raised new funding in October, 2022. It uses artificial intelligence to match investors with uncorrelated, low volatility insurance-linked assets.

Vesttoo secured $80 million in late-stage funding with investments from venture capital firms Mouro Capital, Gramercy Ventures, BlackRiver Ventures and Hanaco Ventures. Wall Street giant Goldman Sachs was also reported to have participated.  

Vesttoo said it intended to use the new capital to expand its footprint globally and widen the offerings of its marketplace platform, which connects insurers and investors. 

"In a time rife with uncertainty, Vesttoo is showing resilience, financial strength and profitability," said chief executive Yaniv Bertele in a statement at the time. 

In 2021, the firm raised $15 million in a series B round led by Mouro Capital with participation from Japan's MS&AD Ventures, boosting its then-valuation to $300 million. 

Vesttoo announced in June this year that it had completed a $120 million renewal of quota share reinsurance cover for a leading London Lloyd’s syndicate.  

It said then that the transaction was a continued sign of demand for new investment capital in the reinsurance industry.  

It added that the renewal provided multi-line cover for a portfolio of long-tail, North American treaty reinsurance and demonstrated Vesttoo's commitment both to finding collateralised solutions for complex portfolios and delivering the levels of service required to retain cedents as long-term partners. 

"This transaction highlights what Vesttoo brings to the market – a new bridge between the insurance and the capital markets," Brian Kirwan, Vesttoo's global head of P&C and speciality said then. "Vesttoo enables cedents to strengthen their balance sheets while allowing capital market investors to access an attractive asset class that was previously out of reach. We pride ourselves in offering the highest standard of service in the market, especially when this leads to valued clients renewing with us in 2023.

“This renewal is testament to the hard work by our experienced team members across the globe and we look forward to further developing this mutually-beneficial relationship in the years ahead."