Porch Group Files Lawsuit Against China Construction Bank in the US

96

Porch Group, a U.S.-based provider of insurance and home inspection software, has initiated legal action against China Construction Bank Corp, the third-largest lender in China by assets, alleging its involvement in a significant fraud scheme that resulted in substantial losses for Porch.

According to the complaint filed in the U.S. Southern District Court of New York, Porch and its subsidiaries accuse China Construction Bank of colluding with individuals from the now-defunct Israeli insurance firm Vesttoo to issue counterfeit reinsurance letters of credit. These fraudulent letters purportedly guaranteed access to reinsurance funds for insurance companies.

Porch asserts that it and its subsidiary, Homeowners of America Insurance Co, paid substantial premiums for nonexistent reinsurance coverage until the discovery in July 2023 that certain letters of credit supporting Vesttoo’s reinsurance transactions were fraudulent.

Porch claims that Homeowners of America suffered significant losses when its reinsurance facility, supported by a falsified $300 million letter of credit from China Construction Bank, was revealed to be worthless. The complaint states that Porch will seek monetary damages to be determined at trial.

As a result of the scandal, Homeowners of America paid out $80 million to cover insurance claims that should have been reinsured, while Porch itself had to allocate $57 million to stabilize the subsidiary. Additionally, Porch’s stock price experienced a decline following the revelation of the fraud.