A new Federal Court lawsuit by the administrator of collapsed Greensill Bank against IAG “raises additional questions” about how IAG monitored risks of insurance agency Bond & Credit Co, according to the Australian Financial Review (AFR).
Greensill companies provided financing to business entities, including those of Liberty Steel, that had insurance covering the risk of non-repayment. The AFR said that IAG allegedly agreed to insure billions of dollars in debts at Liberty Steel, despite growing concerns over the company’s rapid expansion.
The administrator alleges that companies associated with Liberty Steel had, by March 2021, failed to repay Greensill, with almost €2.18 billion “outstanding”, triggering legal action.
The AFR said that in other such cases, IAG alleged that Bond & Credit Co had gone beyond its allowed limits in writing policies associated with Greensill, but in this case, the administrator tried to pre-empt any legal replies that the agency was unauthorised to sign IAG to the policy.
“If such an argument was run in this latest case, the administrator’s legal claim maintained it would have a misleading and deceptive claim against Bond & Credit for allegedly representing it had authorisation to cut a deal on IAG’s behalf,” the news outlet said.
IAG declined to comment to the AFR, referring to its previous statements claiming the company had “no net” exposure to Greensill-linked matters due to reinsurance agreements and the sale of its 50 per cent interest in Bond & Credit Co to Tokio Marine, who it is working with in “defending these claims”.
Tokio Marine also declined to comment, referring to a previously issued statement alleging Greensill entities fraudulently misrepresented material matters to the insurance agency.
Greensill entities have rejected claims of fraud.