Greensill Capital’s insurers have claimed that the collapsed finance company misled them, threatening to complicate efforts by investors to recover losses stemming from the scandal.
The allegations are summarised in a report from the administrator of Greensill’s German banking subsidiary, which reveals the insurers’ arguments against paying out under some of the policies they wrote.
Insurance was at the heart of Greensill’s business model, allowing the SoftBank-backed supply chain finance group to transform lending to often high-risk businesses into seemingly safe investments that were then sold to investors across the world.
The events that ultimately led to Greensill’s collapse in March were set in motion after The Bond & Credit Co, an obscure Australian insurer that provided much of the group’s cover, launched an investigation last year into one of its underwriters and refused to renew its policies.
Japanese insurance group Tokio Marine acquired a majority stake in BCC from Insurance Australia Group (IAG) in 2019.
According to the administrator’s report, IAG has argued that Greensill Capital or Greensill Bank “made false statements” about the insured claims and underlying businesses, adding that the finance firm “potentially even deliberately deceived in advance”.
Some of these claims related to companies belonging to industrialist Sanjeev Gupta’s GFG Alliance, one of Greensill’s biggest clients, the report added. Another related to a contract linked to Bluestone Resources, a US coal mining company that has sued Greensill for alleged fraud.
The report also states that Tokio Marine has challenged the validity of an insurance policy related to GFG “on the same grounds” as IAG.
A copy of another insurance policy provided by BCC to Greensill, which was disclosed in an Australian court case earlier this year, stated that it would be voided if the company knowingly made “false or fraudulent statements”.
The revelations in the report, a copy of which was seen by the Financial Times, will concern investors who regard insurance as one means of recouping losses tied to Greensill, whose implosion mushroomed into a financial and political scandal.
Credit Suisse’s clients, which had $10bn of funds tied to Greensill, are among those most exposed. The validity of the insurance is also vital for small German towns that poured €500m into Greensill Bank, whose assets mostly comprised loans to Gupta’s companies.
The report also sheds further light on BCC’s investigation into Greg Brereton, the Australian underwriter who was fired after allegedly insuring Greensill “in excess of his delegated authority”.
It states that IAG has claimed that Brereton was not authorised to accept a $35m claim relating to Emirates Hospitals Group. The FT reported last year that Greensill-linked investment funds at Credit Suisse had $34m of exposure to the UAE-based healthcare company, which was owned by one of the shareholders of NMC Health, a former member of the FTSE 100 that collapsed last year amid fraud allegations.
Lex Greensill, who founded the eponymous supply chain finance firm, told UK lawmakers in May that the insurance claim relating to NMC was a good example of this kind of cover successfully paying out and protecting its investors from losses.
Citing the investigation into Brereton, the report also states that IAG has questioned whether a year-long extension of Greensill’s main insurance policies in March 2020 was valid.
IAG and Tokio Marine, which ultimately held risk underwritten by BCC, have both denied they have material exposure stemming from Greensill’s collapse. In March, IAG said it had passed its Greensill exposure that was not covered by reinsurance to Tokio Marine as part of the 2019 sale of BCC.
Greensill, IAG and Tokio Marine declined to comment. Brereton did not respond to requests for comment.
The report also includes details of Greensill Bank’s other insurance policies including €100m in directors & officers cover, which mostly protects against negligence claims targeting the bank’s management and supervisory board. The first €50m of the insurance is provided by parts of Allianz, Europe’s largest insurer, and the other half by UK-based Howden Group through its underwriting unit Dual — which “holds the pen” on behalf of other insurance carriers.
Greensill Bank also has €50m in business fraud cover. The first €25m is provided by Allianz’s Euler Hermes, whose backing the FT revealed last month, and the rest by Dual.
Howden declined to comment. Allianz said it did not comment on specific client details, but added its exposure to Greensill was not material and said “as a general rule” D&O policies do not cover intentional or criminal acts.
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