The insolvency administrator for Greensill Bank is suing an arm of IAG for US$35 million ($49 million), claiming the insurer refused to pay claims related to the collapse of Greensill Capital.
Dr Michael Frege, insolvency administrator for Greensill Bank, which was part of the Greensill Capital group, filed the suit in the Federal Court of Australia. However, the Australian Financial Review (AFR) says IAG will likely defend the action.
Frege alleges Greensill Bank, Greensill Capita, and IAG entered into a trade credit insurance policy via insurance agent Bond & Credit Co (BCC), in which IAG held a 50 per cent stake but sold to Japanese insurance group Tokio Marine in 2019.
IAG and Tokio Marine deny they have material exposure stemming from Greensill’s collapse. According to the UK’s Financial Times (FT), IAG said the exposure not covered by reinsurance had passed to Tokio Marine as part of the BCC sale.
BCC guaranteed billions of dollars of Greensill Capital securities that it sold to Credit Suisse, GAM Investments, and Greensill Bank.
According to the FT, IAG argued that Greensill Capital or Greensill Bank “made false statements” about the insured claims and underlying businesses. Tokio Marine is also said to have challenged the validity of an insurance policy on the same grounds as IAG.
The lawsuit says IAG is liable to pay US$35 million owed by Emirates Hospitals Group, which used Greensill Capital’s financial services to pay suppliers.
The FT said the events leading to Greensill’s collapse in March 2021 began when BCC declined to renew its policies after commencing an investigation into one of its underwriters.
According to the FT, the administrator’s report said BCC fired the underwriter, who was “in excess of his delegated authority”, claiming he was not authorised to accept a US$35 million claim relating to Emirates Hospitals Group.