Tokio Marine accuses Greensill Capital of fraud

Japanese insurer Tokio Marine said on Monday the policies that enabled billions of dollars in lending by Greensill Capital, the supply chain financing group that collapsed last year, were “fraudulently obtained”.

The statement marked the first time since the March 2021 insolvency of the Anglo-Australian financial services company that the Japanese insurer had formally accused Greensill of fraud.

It also provided confirmation that Greensill’s insurers would use allegations of misrepresentation as a critical defence against paying out on cover provided to the finance group, as reported by the Financial Times in July.

Tokio Marine said investigations into policies written at subsidiary The Bond & Credit Co, the Australian unit at the heart of the Greensill relationship, had found that “matters material to the underwriting of the policies were fraudulently misrepresented to BCC by Greensill”. 

It added there was a “fraudulent failure” to disclose “material matters” before policies were agreed and extended and that the misrepresentations continued after Tokio Marine bought the BCC operation in 2019.

“In light of those fraudulent misrepresentations and fraudulent breaches of an [insured party’s] duty of disclosure, Tokio Marine has today advised counterparties that these policies and related obligations are void from inception,” the insurer said.

The statement will come as a blow to Greensill investors, who see insurance claims as a way of recovering their losses.

The fallout from the Greensill scandal has highlighted practices at BCC, the underwriting business that provided it with the crucial insurance cover that allowed investors to treat debts originated by the finance group as almost risk-free.

BCC’s Sydney office was once visited by former UK prime minister David Cameron, then an adviser to Greensill, underlining its importance to the company. When a BCC executive was fired in 2020 for exceeding his underwriting authority, Greensill’s main insurers pulled back and it failed to find cover elsewhere, triggering the group’s demise.

Tokio Marine, which first publicly questioned the validity of the insurance in March 2021, continued to say it would defend itself against any claims, including Greensill-related proceedings in Australia against Insurance Australia Group. People close to the Japanese insurer said the Greensill insolvency process created a likely “pipeline of claims” in coming months and years.

IAG said on Monday it was continuing to “work together” with Tokio Marine to defend the claims and it “maintains its position that it has no net insurance exposure to trade credit policies sold through BCC”.

IAG has previously said it passed any exposure to Tokio Marine as part of the BCC sale.

Greensill’s administrator declined to comment.

Credit Suisse declined to comment on the Tokio Marine statement.

In a separate disclosure on Monday, the Swiss lender said the process of launching legal action against insurers and companies that borrowed from its Greensill-linked fund could take “around five years”.

Credit Suisse also disclosed it had clawed back $43mn in pay from employees involved in the supply-chain funds, 10 of whom were fired.

The bank was responding to questions from shareholders, led by Swiss foundation Ethos, who were demanding a special audit into the bank’s failings on Greensill. The investors successfully campaigned to have Credit Suisse amend a vote at its annual meeting this month that would have absolved directors and executives for the Greensill scandal.