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Insurance Australia Group, the Sydney-based insurer embroiled in litigation over the collapse of finance company Greensill Capital, has said it has 20 claims with an aggregate value of A$7bn ($4.5bn) related to the cases.
The insurer is one of a number of such groups, including Tokio Marine and Zurich, that have refused to pay out on Greensill’s credit cover.
Sydney-based IAG, which detailed the aggregate figure for the first time in its annual report on Monday, faces multiple Australian legal cases from investors in Greensill-sourced debts.
Greensill had arranged trade credit insurance through Bond & Credit Co — the underwriting agency in which IAG formerly had a 50 per cent stake — to cover contracts in case of default. By its end, Greensill had $10bn of insurance arranged by BCC covering the debts it packaged up for investors.
IAG has previously denied it has any “net” exposure to the BCC policies signed with Greensill Capital and Greensill Bank, saying it passed this to Tokio Marine, which bought the BCC unit in 2019.
Still, the Australian insurer has set aside A$467mn to cover legal fees and claims handling related to the cases, according to its report.
In response to IAG’s report, Japan’s Tokio Marine issued a statement reiterating its position that Greensill’s insurance was void from inception and that it “does not currently anticipate any material impact” on its finances from Greensill-related claims.
Australia’s federal court is expected to start formal proceedings on a series of insurance claims from Greensill creditors in the coming months. The litigation is seen as an important test of the validity of insurance when policies are heavily contested on the basis of alleged misrepresentation.
Greensill was a supply-chain lending company led by Lex Greensill and advised by former UK prime minister David Cameron. The company collapsed two years ago after its insurance expired, sparking a political and financial scandal.
IAG has said in its legal filings that it is not bound by the policies signed between BCC and Greensill as the cover agreed was in breach of limits set on the unit. It has also argued that if it is deemed to be bound by the disputed BCC policies, it is not liable for the sums sought by creditors.
Investment companies including Credit Suisse and White Oak have challenged the insurers’ arguments that the policies are invalid in legal filings.
IAG’s annual report noted that investors had made a series of allegations against various parties, including that BCC breached its underwriting authority and that Greensill entities had engaged in “misleading or deceptive representations”.
The insurer said it would take “a number of years” to resolve the outstanding litigation and that it was also managing claims issued by BCC unrelated to the Greensill policies.
IAG added that if the court ruled it had to pay out on the insurance, it would rely on the 2019 agreement to pass the credit insurance exposure to Tokio Marine. However, IAG warned that those agreements could also be challenged.
In its response to one of the Greensill-related claims, IAG said part of the reason it would not pay was that the insured debts were “many steps removed from an underlying, real-world transaction”, according to a filing seen by the FT.
IAG also said in the filing that regular information provided to it by the BCC unit “failed to disclose material information and contained substantial inaccuracies”, including not disclosing 10 policies purportedly written on IAG’s behalf by BCC.
