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Tokio Marine anticipates no financial fallout from Greensill collapse

Having reviewed the relationship between its subsidiary and Greensill, the insurer said its expected net exposure ‘remains unchanged’, and it sees no need to adjust its financial guidance

Tokio Marine Holdings has addressed speculation surrounding its subsidiary company, The Bond and Credit Company Co. (BCC), an insurance agent located in Australia, and its relationship with financial service company Greensill Capital, which fell into administration earlier this month. 

Having reviewed the relationship “carefully”, the insurer said that its expected net exposure “remains unchanged”, adding that it sees no need to adjust its financial guidance, and does not anticipate any financial impact resulting from the collapse of Greensill for its next fiscal year. 

BCC was acquired from Insurance Australia Group (IAG) and others in April 2019, during that time prior to the acquisition the company handled its insurance policies, after which the group handled the policies as an agent of Tokio Marine & Nichido Fire (TMNF) Insurance in its Australia branch.

In a statement, Tokio Marine said: “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. 

“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 emphasised the figures being reported to the media, in regards to underwriting, referred to the accumulated amount of the accounts receivable of Greensill, not exposure for TMNF.

As shown in court documents, BCC informed Greensill and its broker in 2020 that Tokio Marine would not “renew, limit, extend, or underwrite” new polices, adding that it was “fully reserving” its rights while continuing to assess the validity of Greensill’s cover.

The statement follows a report published on Bloomberg earlier this month, which suggested that Tokio Marine was facing a “larger than expected” exposure to the Greensill Capital meltdown. 

Tokio Marine added that it will continue to monitor the situation closely.

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