Porch releases Aon from Vesttoo claims as it signs strategic agreement
Porch Group, a software driven insurer with a homeowners insurance arm, has released Aon from claims arising from the Vesttoo fraud at the same time that it enters a strategic business agreement with the broking giant.
Aon will pay Porch up to $30 million. Nearly $25 million will be paid upfront and approximately $5 million will be paid over the following four years.
As part of this agreement, the parties also signed a release of claims arising from the Vesttoo fraud. Porch said it has not released any claims against non-Aon parties related to these matters and “intends to vigorously pursue recovery”.
Porch said it was seeking, “a strong partner who could both deliver strong outcomes with reinsurance placements and importantly, provide other services across Porch Group such as data modelling and more”.
Aon and Porch Group will work together to place 2024 reinsurance coverage at the upcoming renewal on April 1, 2024.
Porch chief executive officer Matt Ehrlichman (pictured) said: “We think Aon is the right partner for us. They are a well-known name in the insurance industry who can provide a variety of important services to help across our business. Porch and our insurance carrier have worked with Aon for many years and we are excited to expand this relationship with Aon as our sole partner for certain services through 2028.”
Porch sued Vesttoo after revealing its Homeowners of America Insurance Company (HOA) subsidiary had an exposure to reinsurance contracts arranged via Vesttoo.
It also said it would pursue damages against other parties connected to the scandal, which rocked the insurance-linked securities sector last year.
Porch took a charge of $48.2 million in its second-quarter results and said it was pursuing $300 million of collateral from a letter of credit (LOC).
Homeowners of America Insurance Company (HOA) had an exposure of $175 million after the scandal came to light, and was able to replace the cover.
Porch made a cash investment of $57 million in HOA, in exchange for a $49 million surplus note from HOA and the acquisition of HOA’s rights to potential claims stemming from the fraud connected to Vesttoo and others, while it also joined the insurtech’s bankruptcy proceedings as a member of the official creditor committee.
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