Aon Accused of Contributing to Vesttoo's Collapse: Lawsuit

Aon accused of contributing to collapse of Israeli insurance startup Vesttoo, valued at $1 billion. The lawsuit claims Aon ignored red flags and encouraged counterparties to work with Vesttoo despite internal concerns. Aon denies the allegations, saying it was a victim of Vesttoo's deliberate fraud. The case involves a product called Collateral Protection Insurance, which provided insurance to lenders in the event of a borrower's liquidation. Vesttoo filed Chapter 11 in 2023 and subsequently liquidated.

Insurance broker Aon Plc is facing a civil lawsuit alleging its role in the collapse of Israeli insurance startup Vesttoo Ltd. The lawsuit, filed in Delaware bankruptcy court by a trustee responsible for recovering money for Vesttoo's creditors, accuses Aon of ignoring red flags and encouraging counterparties to work with Vesttoo despite internal concerns [1].

Vesttoo, once valued at $1 billion, filed for Chapter 11 in 2023 and subsequently liquidated. The trustee's lawsuit claims that Aon's "collateral protection insurance" (CPI) program was pushed into the market on the back of unreliable valuations and conflicts, and that forged letters of credit (LOCs) left counterparties without the bank backing they believed they had [2].

The lawsuit alleges that Aon "relied heavily" on Vesttoo's ability to find reinsurance capacity through its capital market investors for its riskiest transactions. Aon's CPI product was intended to provide insurance to lenders in the event that a liquidation of a borrower's assets would not produce enough to repay debt. However, the lawsuit claims that Aon ignored warnings about the quality of LOCs and channeled especially risky deals to Vesttoo as it built out CPI [2].

Aon has denied the allegations, describing the case as "a perverse attempt by Vesttoo’s bankruptcy estate to shift responsibility for Vesttoo’s deliberate fraud to Aon, one of the fraud’s biggest victims." The insurance broker says Vesttoo's own investigative report pointed to executives at the company and "other co-conspirators" as responsible for the deception [1].

The lawsuit also names other parties, including China Construction Bank Corp. (CCB), whose former employee has been accused of working with Vesttoo insiders to create fake LOCs used by the platform. CCB has said in court papers that a former "low-level" employee based in Hong Kong didn't have authority to issue billions of dollars in LOCs on behalf of the bank [1].

The case highlights the importance of counterparty diligence, independent valuation standards, and clear audit trails in insurance and reinsurance transactions. It also underscores the need for insurers to be cautious when working with third-party platforms and sponsors in the capital markets.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-14/aon-accused-of-contributing-to-collapse-of-startup-vesttoo
[2] https://www.insurancebusinessmag.com/au/news/breaking-news/aon-slammed-with-lawsuit-alleging-fraud-over-unique-insurance-program-546331.aspx