Porch sues China Construction Bank in US over reinsurance fraud losses

May 10 (Reuters) – U.S. insurance and home inspection software provider Porch Group is suing China Construction Bank Corp (CCB) (601939.SS), opens new tab, the country’s third-biggest lender by assets, for allegedly enabling a “massive fraud” that caused “monumental losses” for Porch.

Porch (PRCH.O), opens new tab and its units accused the Chinese lender of conspiring with employees of the now bankrupt Israeli insurance firm Vest too to issue dozens of fake reinsurance letters of credit that guaranteed insurance companies access to reinsurance funds, according to a complaint filed to the U.S. Southern District Court of New York on Thursday.

Porch and its unit, the Homeowners of America Insurance Co, paid tens of millions of dollars in premiums for this non-existent reinsurance until it emerged in July 2023 that certain letters of credit backstopping Vesttoo’s reinsurance transactions were fake, the company said.

CCB didn’t immediately respond to a request for comment from Reuters.

Vesttoo filed for Chapter 11 bankruptcy protection in the U.S. last year after discovering fake letters of credit had been used on its platform. The company provided insurers with access to so-called insurance-linked securities, an alternative form of reinsurance. These securities may be backed by collateral in the form of letters of credit.

Source: REUTER