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The Chief Financial Officer (CFO) of the specialist Lloyd’s insurance and reinsurance marketplace, Burkhard Keese, called on the industry to be more diligent in light of the ongoing fraudulent LOC issue surrounding insurtech Vesttoo.
Addressing an audience of more than 200 at the Artemis ILS conference in London on Tuesday, Keese commented on the situation at Vesttoo.
“I know you should never close on a negative point. But I have to say that the whole Vesttoo stuff is not helpful at all. It just shows again, an industry which is stupid, it’s that simple. And honestly, on securitized vehicles, just to have LOCs in there, it’s not my cup of tea,” said Keese.
The CFO explained that while Lloyd’s does accept LOCs, out of $40 billion of capital the marketplace has around $7 billion, adding that Lloyd’s also has a huge process in place to verify LOCs and their counterparties, including the bank and the provider of the LOC.
Keese warned about ending up in a situation where there are suddenly some people taking on reinsurance risk, and all the capital they have is a falsified LOC. Reiterating that this is not helpful.
“And as an industry we really must be more diligent and not following any stupid idea that people have. This is fraud, or that was fraud and I’m pretty sure regulators will react across the globe.
“In the UK, and I’m seeing it quite clear, in the UK ILS regime, you cannot accept anything else other than securities and cash,” said Keese.
“So, I think that is really where, we should all think about this. With all the need for having higher returns, but we have to stay reasonable, and this time again, once again, we got caught with very stupid transactions,” he added.