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Tokio Marine’s reinsurance may not cover Greensill losses: reports

19th March 2021 - Author: Matt Sheehan

Sources at Bloomberg believe that Tokio Marine may not be able to rely on its reinsurance program to limit exposure to the collapse of financial services company Greensill Capital.

greensillTokio Marine reported last week that its reinsurance coverage was expected to absorb some of the costs the insurer may face on trade credit insurance policies related to Greensill.

But now, Bloomberg has reported that the reinsurance contracts Tokio Marine referenced may not actually cover the unit that did the most business with Greensill.

According to the publication, Tokio Marine’s Australia Bond & Credit Co. isn’t covered by key reinsurance protections, despite having written more than US $7.7 billion of insurance policies for Greensill at one point.

What’s more, sources confirmed that reinsurers including Hannover Re and SCOR had recently been told by Tokio Marine that their exposure to Greensill costs would be negligible.

Greensill, which specialises in supply-chain finance, filed for administration earlier this month after warning that it was in “severe financial distress” and unable to repay a $140 million loan to Credit Suisse.

Greensill lost its insurance coverage for the debt repackaging business and said that its largest client, GFG Alliance, had started to default on its debts.

This collapse has sent shockwaves through financial markets and could drive significant losses for some trade credit re/insurers.

As we previously reported, Australian insurer IAG confirmed it has no net exposure to trade credit policies including those sold through subsidiary BCC to Greensill entities.

Following the sale of BCC in April of last year, Tokio Marine assumed any remaining exposure to trade credit insurance written to support Greensill’s supply-chain finance business, which means it will foot the bill for any losses.

A spokesman for Tokio Marine declined to comment on the situation and also on whether Tokio Marine has other reinsurance policies covering the Greensill risk, Bloomberg said.

However, it’s been suggested that Tokio Marine may be examining the validity of the insurance policies it offered to Greensill, or that the company could try contest claims following a German regulatory probe which found that Greensill Bank had claimed on transactions that hadn’t yet occurred.

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