A fresh lawsuit in Delaware has escalated the industry reckoning over collateral protection insurance tied to intellectual property, with the Vesttoo Creditors Liquidating Trust accusing Aon and China Construction Bank (CCB) of conduct that, it says, precipitated Vesttoo’s collapse and left insurers nursing large claims.
Filed on behalf of creditors (which include subsidiaries of Markel and Beazley) to the failed insurtech, the complaint alleges that Aon’s “collateral protection insurance” (CPI) programme was pushed into the market on the back of unreliable valuations and conflicts, and that forged letters of credit—allegedly arranged with the involvement of a CCB employee—left counterparties without the bank backing they believed they had. The Trust is seeking to recover losses it says were borne across the insurance chain, from carriers to capital-markets investors.
According to the filing, Aon’s CPI structure was sold as a way for high-growth companies to borrow against the value of their IP, with insurers providing a policy to secure the collateral and investors taking the risk. The Trust says the scheme scaled quickly, with Vesttoo used to connect insurance risk to capital markets, even as warning signs mounted over the quality of letters of credit (LOCs) presented to support transactions.
The complaint alleges that more than $2.8bn of LOCs were forged and that internal messages at Aon reflected unease about lending to pre-revenue borrowers and the difficulty of projecting IP values. It further claims Aon channelled especially risky deals to Vesttoo as it built out CPI.
On the banking side, the filing asserts that a CCB employee used institutional email and meeting rooms to lend credibility to LOC arrangements later found to be fake, and that purported U.S. reinsurance LOCs carrying CCB’s name expanded markedly in 2022. The Trust argues that these dynamics, taken together, set the stage for a wave of defaults and for insurers to discover the collateral they expected to draw upon did not exist.
Aon rejects the accusations, describing the case as “a perverse attempt … to shift responsibility for Vesttoo’s deliberate fraud to Aon, one of the fraud’s biggest victims”. The broker says Vesttoo’s own investigative report pointed to executives at the company and “other co-conspirators” as responsible for the deception, and that it will “vigorously defend Aon against these meritless claims”.
The brokerage issued the following statement: "This lawsuit represents 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. Vesttoo has already acknowledged in its own investigative report that executives of the company, along with other co-conspirators, were responsible for the fraud and intentionally sought to mislead Aon and other impacted parties. We will vigorously defend Aon against these meritless claims and continue to take steps to both maximize recoveries for our clients and strengthen standards across our industry.”
Public filings and court material cited in reporting also highlight examples used by plaintiffs to question valuation outputs in CPI deals and note that Aon’s chief executive in mid-2023 referenced a marketplace of “almost 30 insurers” and $2bn in aggregate insured transaction value for IP lending—materials that have since been removed from the firm’s website.
Aon launched its IP-capital markets proposition in 2020, billing it as a route to non-dilutive finance for IP-rich firms. The inaugural deal—backed by a consortium of insurers—was positioned as a landmark transaction designed to open a new asset class to lenders and risk transfer markets. As interest grew, CPI risk was packaged for investors and Vesttoo provided a distribution channel between insurance and capital markets.
What followed, the Trust alleges, was a run of borrower failures, heavy draws expected on LOC collateral, and the discovery that LOCs were forged—events that cascaded into Vesttoo’s 2023 bankruptcy and broader losses for insurers and reinsurers participating in the structures.
Counterparty diligence. The case puts renewed focus on verification of bank instruments in collateralised reinsurance and ILS-adjacent deals. Reliance on third-party platforms and sponsors will face closer scrutiny—expect enhanced authentication protocols for LOCs and tighter onboarding of credit providers.
Valuation governance. With IP now central to many balance sheets, the dispute underscores the need for independent valuation standards, conflict management and model transparency when insurance is used to underpin lending. Boards and CROs will want clearer audit trails between valuation assumptions, policy wording and recoveries.
Product design and capital flows. If courts side with the Trust on elements of the CPI model, appetite for similar structures could ebb, with capital re-directed to better-understood risks or to parametric/credit insurance where triggers are cleaner. Conversely, a strong defence could help salvage parts of the market—albeit with higher hurdles on borrower quality and collateral verification.
Litigation and reputational risk. Insurers named in CPI towers, brokers, trustees and arrangers should anticipate discovery demands and potential follow-on actions. Even firms not party to the suit will be asked by boards and regulators how they would avoid similar failures.
Key hearings in the Delaware bankruptcy court will determine the trajectory of the case and any recovery available to creditors. Parallel to the courtroom process, the sector is already re-pricing operational risk: underwriting committees are reassessing borrower profiles (particularly pre-revenue), insisting on bank-to-bank confirmations for LOCs, and narrowing coverage terms around collateral enforcement.
For an industry that prizes innovation but is measured by prudence, the Vesttoo saga is a reminder that new pathways to capital must be built on verifiable collateral, independent valuation and uncompromising gatekeeping—otherwise the losses land squarely with insurers who thought they were transferring risk, not inheriting it.
