Australia IAG Denies Greensill Publicity After Shares Fall

Insurance coverage Australia Group mentioned it had no “web insurance coverage publicity” to insurance policies offered to Greensill Capital on Tuesday in response to a ten p.c drop within the share value amid issues over its ties to the London monetary group that collapsed.

The Australian insurer advised traders that the sale of its 50% stake in BCC, a Sydney-based industrial credit score insurer, to Tokio Marine in Japan in 2019 eradicated its publicity to insurance policies offered to Greensill, a finance firm. of the availability chain.

The market replace follows a halt in buying and selling introduced by IAG on the Australian inventory market following the sale of its shares following information that Greensill had filed for administration within the UK and Australia. IAG shares fell 49 cents to A $ 4.32 (US $ 3.31) in early morning buying and selling.

IAG mentioned it had put in place a transitional association following the sale of BCC to Tokio in April 2019 which lasted till the top of June 2019, whereby the Japanese insurer retained the chance for any new coverage taken out, minus reinsurance.

“Along with the prolonged reinsurance put in place by IAG, as a part of the sale, IAG has entered into agreements with Tokio Marine to carry any remaining publicity to industrial credit score insurance coverage underwritten by BCC by way of IAL. [a subsidiary of IAG]”IAG mentioned in an announcement.

Shares of IAG rallied after the market replace, closing almost 4 p.c at AU $ 4.62.

IAG, Tokio Marine and the wholly owned subsidiary of Japanese insurer BCC have supplied industrial credit score insurance coverage to Greensill, whose implosion threatens tens of hundreds of jobs amongst its shoppers within the UK and Australia.

Final week, Greensill misplaced a authorized battle to drive insurers to increase two insurance policies overlaying $ 4.6 billion in working capital funding – a transfer that precipitated its collapse. Credit score Suisse additionally froze $ 10 billion in funds linked to the corporate, depriving it of a serious supply of funding.

Based on courtroom paperwork launched final week, Tokio Marine notified Greensill of its choice to cease hedging in July after discovering {that a} BCC underwriter had exceeded their danger limits, insuring quantities in extra of $ 10. billion Australian {dollars}. The underwriter was terminated.

Tokio Marine declined to touch upon its publicity to Greensill. On Tuesday, its share value was up 1.7% through the morning session in Tokyo, traders haven’t but assessed the chance held by the Japanese group.

Morningstar analyst Nathan Zaia mentioned IAG’s assertion was reassuring and will assist type out market points.

“On paper, it seems to be like IAG should not be affected, however it might nonetheless flip right into a authorized battle between IAG and Tokio Marine,” Zaia mentioned.

Nonetheless, the collapse of Greensill frightened IAG traders.

On Monday, John Hempton, a short-selling hedge fund supervisor, posted a weblog publish revealing that he wrote to Australian monetary regulators three months in the past to report Sydney-based IAG’s publicity to Greensill.

Hempton, recognized for betting towards corporations corresponding to Valeant Prescribed drugs and Wirecard, raised issues concerning the stage of insurance coverage prolonged to Greensill by IAG, calling it a “potential solvency danger” for the group in its letter to the corporate. Australian prudential regulator Apra.

Hempton additionally cited the chance held by the Japanese Tokio Marine. The 2 corporations may very well be in a “world of ache,” he mentioned.

Apra declined to touch upon Tuesday.

Australian regulators have mentioned IAG’s publicity with Greensill. In addition they requested Credit score Suisse about its relationship with Greensill, together with its monetary publicity to the corporate and its position as an advisor in a pre-IPO fundraiser that was subsequently referred to as off, in response to two individuals acquainted with the discussions.

Credit score Suisse has appointed McGrathNichol as receiver of a Greensill firm in Australia in an try to safe its pursuits, together with a $ 140 million mortgage superior to the finance firm final yr.

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