Bloomberg has reported that Tokio Marine’s exposure to the Greensill Capital failure is higher than it expected because the insurer is not covered by its reinsurance contracts.
The report claims that reinsurers including Hannover Re and Scor have asked Tokio Marine to clarify the Greensill situation and were told the insurer’s exposure is negligible.
Citing people familiar with the matter, Bloomberg’s report said that Tokio’s Australia-based subsidiary Bond & Credit Co is not covered by contracts with the key group of reinsurers.
Bond & Credit Co at one point wrote more than A$10bn ($7.7bn) of insurance policies for Greensill, the report said.
The sources told Bloomberg that the reinsurance contracts were purchased by Tokio Marine’s HCC unit.
“While it was intended that the deal would also cover Bond & Credit Co, the necessary approvals were never granted because of an internal lapse, one of the people said, without providing more details,” the Bloomberg report stated.
Bloomberg said that a Tokio Marine spokesman did not comment on the matter or on whether the insurer has other reinsurance policies covering the Greensill risk.
Last week reports emerged that Tokio Marine had said its exposure to Greensill was not large enough to warrant a revision to its guidance for the financial year ending in March.
The insurer said it was studying the validity of the insurance policies in the wake of investigations by German financial watchdog BaFin, sources cited by Financial Times said.
Greensill’s UK operating arm and its Australian head company collapsed into administration this month after losing the support of Credit Suisse, its financial backer. Greensill lost a legal battle aimed at forcing its insurers to extend two policies covering $4.6bn of working capital financing.
According to court documents, Tokio Marine notified Greensill of its decision to stop coverage in July after it discovered that an underwriter at its subsidiary Bond & Credit Company had exceeded risk limits.
It is expected that questions over liability would ultimately be settled in courts in Japan, Australia and possibly Germany.
Insurance Australia Group said on 9 March that it had “no net insurance exposure” to Greensill-related policies and had agreed to pass any exposure, net of reinsurance, to Tokio Marine in the 2019 sale of its 50 percent stake in Bond & Credit Co.