Homeowners of America hit in Vesttoo collateral scam, plots legal steps
Homeowners of America (HOA), a managing general agent and insurance carrier hybrid, emerged amongst victims of the rising collateral scandal at insurtech ILS platform Vesttoo, taking a $48.2 million charge against second quarter earnings as early recovery actions against a flawed deal came up short.
A reinsurance agreement arranged via Vesttoo had been designed to provide partial quota share coverage as well as up to approximately $175 million catastrophe event coverage, but proved phony when HOA scratched under the surface of the collateral backing following reports of irregularities on similar deals done via Vesttoo.
HOA terminated the deals retroactively to mid-year and seized $47.6 million in available liquid collateral from a reinsurance trust, of which HOA was the beneficiary, before covering the rest from the provision.
“HOA is evaluating and intends to pursue all available legal claims and remedies to enforce its rights with respect to the letter of credit required by the reinsurance contract in the amount of $300 million as additional collateral, and to seek recovery of all losses and damages incurred as a result of terminating the reinsurance agreement due to allegations of fraudulent activity by third parties,” parent company Porch Group said of developments.
HOA has already secured some $42 million in supplemental reinsurance coverage and continues the search to fully plug the gap, Porch Group management said. HOA might lean on the Porch Group’s captive reinsurer to some extent.
But HOA could also end up running comparatively naked through an unspecified portion of the period to the year-end deadline for the original coverage, management warned.
“There can be no guarantee or assurance that HOA will be successful in obtaining sufficient supplemental coverage.”
Revelations from Porch Group follow a flood of headlines of an unfolding collateral scandal at the AI-led ILS platform Vesttoo which began on reports that a letter of credit securing a reinsurance deal had been deemed fraudulent.
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