It's the second time in barely a year that a commodity trade financing collapse has put insurers' policy wordings under the microscope, after the reckoning trade credit carriers are still working through following the collapse of US auto parts group First Brands.
For UK brokers and underwriters who have spent the last few years selling trade credit as a growth story, it's a reminder that the product's biggest test always arrives after the money has already gone out the door.
Radiant World, founded by Pinkesh Nahar and estimated by industry sources to trade somewhere in the region of 75 million tonnes of iron ore a year, worth more than $7 billion at current prices, with reported annual revenue of around $12 billion, has spent the summer losing banking partners.
Deutsche Bank and KBC Group froze the firm's Singapore accounts, several other lenders suspended credit lines, and commodity houses including Vitol, Cargill and Glencore stepped back from doing new business with the trader, amid concerns that documents used to secure financing had been fabricated.
Mining giants Rio Tinto and Vale have also struck Radiant off their approved-supplier lists. Singapore's police force has confirmed it received reports about the company and is looking into the allegations. Radiant and Nahar have consistently denied wrongdoing and say the business operates to high commercial and legal standards.
The dispute escalated sharply in late August, when LAM Trade Finance Group II, a fund managed by Jefferies' Point Bonita Capital arm, filed a claim exceeding $500 million against Radiant World, related trader Sapphire Minmetals, Nahar and Sapphire's majority owner Rakesh Sethi in London's High Court, securing a worldwide freezing order in the process.
The claim alleges a "fraudulent scheme" built on falsified invoices, contracts and email correspondence, though notably the court filing doesn't explain exactly how the $500 million figure was calculated, earlier reporting had put the fund's direct Radiant exposure at under $300 million.
Separately, Singapore-based invoice-financing platform Incomlend is pursuing more than $34 million from Radiant and Nahar, alleging in its own filing that the trader used Glencore-linked invoices that had already been settled, backed by contracts it says were fake, to raise $31.7 million from lenders. Mizuho Bank is also seeking to remove management of Radiant's Singapore unit. None of the allegations have been tested in court, and Radiant, Nahar and Sapphire's Rakesh Sethi have not admitted any wrongdoing.
Glencore's own financial exposure has itself become a point of dispute. Reuters reported in August that sources put Glencore's exposure to Radiant at somewhere between $500 million and $800 million a figure Glencore called "incorrect," saying at the time that its exposure was "not material and well below" its $500 million materiality threshold. Weeks later, reporting citing a letter from Radiant to Glencore put the underlying numbers at $951 million owed to Glencore against $471 million owed by Glencore to Radiant, with Glencore said to have taken a roughly $480 million provision covering its net position. Radiant is separately said to have argued in court papers that its relationship with Glencore went beyond a normal counterparty arrangement, at one point describing the commodities giant as "a senior partner in the relationship." Glencore has dismissed that characterisation as "meritless."
According to reporting that first surfaced on Friday, Zurich had written non-payment cover for Radiant against several counterparties, including Glencore, with the policy said to run into double-digit millions of dollars. Allianz Trade, the trade credit arm of the German insurer, also had a policy on Radiant's book, though its exposure is understood to be smaller than Zurich's.
Zurich has pushed back hard on suggestions this leaves it out of pocket, saying in a statement that it "does not have any material exposure to Radiant World."
For a market that has quietly become one of the more lucrative corners of commercial insurance, used not just by traders and suppliers to protect themselves against a customer's insolvency, but increasingly by banks and funds as a hedge against invoice-financing books, it's an uncomfortable pattern. Trade credit policies typically exclude losses arising from certain forms of fraud, but that carve-out has proved anything but straightforward in the courts, which have on several occasions found that insurers must still pay out even where fraud is involved.
Anyone who covered the UK insurance market through 2021 will notice some concerning similarities. The collapse of Greensill Capital, the supply-chain finance firm advised by former prime minister David Cameron, triggered years of litigation over whether trade credit insurers should be on the hook for policies underpinning invoices that turned out to be built on shakier foundations than lenders had assumed.
Zurich is still living with that fallout. It's currently defending a $400 million claim in London's High Court brought by the administrator of Greensill's banking arm, over cover linked to the commodity trading operations of Sanjeev Gupta's GFG Alliance. Zurich has refused to pay, arguing the underlying lending arrangement was a "sham" and that it was given false information when the policy was written — a defence that will sound familiar to anyone tracking how the Radiant dispute plays out.
Radiant World also isn't the only live fraud-linked headache on trade credit insurers' books this year. Allianz Trade was separately named among the insurers exposed to the bankruptcy of First Brands Group, the US auto parts supplier whose collapse exposed a web of invoice financing arrangements and fraud allegations that has kept claims teams busy for months. Point Bonita, the same Jefferies-run fund now suing Radiant World. had already begun winding down after its exposure to First Brands, according to earlier reporting, making it one of the few players unlucky enough to be caught up in both disputes.
None of this means trade credit insurance is broken as a product. Demand for it has held up well even through a volatile couple of years of tariffs and geopolitical risk. But Radiant World, coming so soon after First Brands and while the Greensill litigation is still grinding through the courts, adds to a growing case list that UK brokers placing commodity and invoice-financing risk will want to have front of mind at renewal.
The recurring lesson from all three episodes is the same: policy wordings around fraud exclusions are being tested harder than they have been in years, and the outcome of these disputes will shape how Allianz Trade and its rivals price and structure cover for commodity traders and invoice-finance funds for some time to come. With Zurich simultaneously working through the final stages of its £8.1 billion acquisition of Beazley, and Allianz Trade continuing to expand its UK proposition, both insurers have plenty riding on how cleanly they can draw a line under this one.
