Tokio Marine addresses speculation on Greensill exposure

Tokio Marine addresses speculation on Greensill exposure

Tokio Marine Holdings, Inc. (Tokio Marine) has today addressed speculation regarding its subsidiary company, The Bond & Credit Company Co. (BCC), an insurance agent located in Australia, and its relationship with Greensill Capital. The Japanese insurer noted that it currently anticipates no material impact on its financials for the next fiscal year as a result of its exposure to the fallout of Greensill’s collapse.

Tokio Marine said this follows its careful review of the situation, including its reinsurance position, and that, while it will continue to monitor the situation as needed, on this basis its expected net exposure remains unchanged. BCC was acquired from Insurance Australia Group Limited (IAG) and others in April 2019 and handled insurance policies as an agent of IAG before the acquisition. Following its acquisition, BCC handled insurance policies as an agent of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) Australia Branch.

In a Press release, Tokio Marine noted: “Although it is our general policy not to comment on individual policyholder relationships or policy terms, the publicity regarding this matter requires some clarification.”

The clarification follows yesterday’s Bloomberg report that the insurer faced a larger than expected exposure to the insolvent finance firm which saw its shares fall 5.6%. Tokio Marine highlighted that Greensill was a client of BCC for trade credit insurance and that insurance transactions between BCC and Greensill were underwritten by IAG before the acquisition, and TMNF Australia Branch after the acquisition.

“In light of recent developments for Greensill’s business, we would like to clarify that trade credit insurance does not cover the liability of the policyholder nor the insured; rather it covers the accounts receivable of the insured,” Tokio Marine stated. “Hence if Greensill were the insured, trade credit insurance would cover what Greensill is owed, rather than what Greensill owes others. As such, in that case, the insolvency of Greensill does not crystallise any exposure for TMNF.”

The insurer highlighted that the figures being reported by the media with respect to underwriting, including the report that Tokio Marine’s Australian unit covered in excess of AU$10 billion (around US$7.68 billion), refer to the accumulated amount of the accounts receivable of Greensill, not exposure for TMNF. Court documents about BCC’s business relationship with Greensill reveal that BCC notified Greensill and its broker in mid-2020 that it would not renew, increase limits, extend or underwrite new policies and that it was fully reserving its rights.

“We continue to assess the validity of the cover extended to Greensill,” Tokio Marine said, “[We] will continue to monitor the situation closely.”