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Fallout from the bankruptcy of reinsurer Vesttoo Ltd. in the wake of fraud allegations are rippling through the insurance industry, with Porch Group announcing Tuesday that its insurance subsidiary, Homeowners of America Insurance Company, has been placed under temporary supervision by Texas regulators.
Porch CEO Matt Ehrlichman called the move by the Texas Department of Insurance, “a sensible action for a regulator to take given Vesttoo’s widespread impact on the insurance industry.”
Porch said that since terminating a reinsurance agreement connected with Vesttoo on Aug. 4, Homeowners of America Insurance Company (HOA) has replaced 84 percent of the roughly $175 million in reinsurance coverage provided under that contract.
HOA continues to manage its day-to-day operations, including the writing of new business, renewals and payments of claims, but will remain subject to supervision by the Texas Department of Insurance (TDI) “until the TDI is sufficiently comfortable with HOA’s operations and financial position post-Vesttoo,” Porch said.
Vesttoo claims it’s employing artificial intelligence to modernize the reinsurance industry, a business that helps insurers transfer some of the risk posed by policy claims to investors.
But Vesttoo filed for Chapter 11 bankruptcy protection on Aug. 14 — five days after the Wall Street Journal reported that the Federal Bureau of Investigation and several state insurance commissioners were investigating whether the Tel Aviv-based firm served as a conduit for a multibillion-dollar fraudulent scheme involving faked letters of credit.