A committee of Vesttoo Ltd. creditors reached an agreement with Chaucer Group Ltd. for a $15.6 million settlement for 82.5% of the assets in a unit of the insurtech in one of a number of claims against the failed company.
The settlement was approved by a judge in U.S. Bankruptcy Court for the District of Delaware between the Official Committee of Unsecured Creditors of Vesttoo, appointed in the Vesttoo Chapter 11 cases, and Chaucer Insurance Co. DAC and Chaucer Syndicates Ltd., as managing agent of Lloyd’s Syndicate 1084, a court document shows.
In an early settlement of one of a number of claims disputes against Vesttoo entities by insurers, Chaucer and its affiliate was approved by the Vesttoo creditors committee for $15.6 million, or 82.5% of $18.9 million in funds held by Vesttoo Bay XXIV Ltd., the court document said.
The creditors committee requests the court approve the Chaucer settlement, the document said.
Efforts to reach Chaucer and Vesttoo were not immediately successful.
In reaching the agreement with Chaucer, the creditors committee believes the Vesttoo Bay XXIV settlement is fair as the parties “arrived at their agreement only after rigorous arm’s-length negotiations, including through a mediated process approved and directed by this court,” the document said.
“Although the committee may succeed in opposing any claims for constructive trust with respect to the Vesttoo Bay XXIV cash, there is attendant risk and cost associated with litigating such matters, and no assurance that the court would ultimately find for the committee,” the document said.
The alternative to the settlement would be for the committee to litigate “many legal and factual issues in dispute, which include complex financial transactions and may implicate the application of law of foreign jurisdictions,” the document said. “This litigation would delay and jeopardize the ability to effectuate and carry out the plan. Accordingly, the committee believes that the Vesttoo Bay XXIV settlement is in the best interests of creditors in these Chapter 11 cases.”
Broker Aon plc sees an opportunity to work on recoveries related to the bankruptcy process of Vesttoo over time and is confident about recovering a “meaningful” amount, said its president. “We strategically wanted to draw a line under this issue for our market partners and for ourselves so that we are able to move forward together as partners,” President Eric Andersen said in a recent conference call. He said an effort was made to reach an agreement with the affected parties going forward.
In the quarter, Aon recognized actual or anticipated legal settlement expenses in connection with transactions for which capital was arranged by third party Vesttoo, the broker said at the time. The transactions were in the form of letters of credit from third-party banks that are alleged to have been fraudulent.
“Certain actual or anticipated legal settlement expenses totaling $197 million have been recognized in the current period, where certain potentially meaningful amounts may be recoverable in future periods,” Aon said.
Underwriting entities of Chaucer parent China Investment Corp. have current Best’s Financial Strength Ratings of A (Excellent) and A- (Excellent).