Tokio Marine sees larger-than-expected exposure in Greensill meltdown

Reinsurance contracts don’t cover the unit that did the most business with Greensill

Tokio Marine sees larger-than-expected exposure in Greensill meltdown

Insurance News

By Ryan Smith

Tokio Marine Holdings is looking at a larger exposure to the Greensill Capital meltdown than it expected after finding that reinsurance contracts didn’t cover its unit that did the most business with Greensill.

Tokio Marine’s Australia Bond & Credit Co. at one point wrote more than $7.7 billion worth of insurance policies for Greensill, according to a Bloomberg report. However, the unit isn’t covered by contracts with a key group of reinsurers. A group of the companies, including Hannover Rueck SE and Scor SE, recently asked Tokio Marine to clarify the situation with Greensill and were told that their exposure was negligible, sources told Bloomberg.

“We have reviewed this situation carefully, including our reinsurance position, and will continue to do so as needed,” Tokio Marine said in a statement emailed to Bloomberg. “On that basis, our expected net exposure remains unchanged, and as a result we don’t see any need to adjust our financial guidance.”

Greensill’s collapse was triggered when the Bond & Credit Co. declined to renew policies covering billions of dollars of loans Greensill made. Tokio Marine had said that a significant portion of its remaining Greensill-related risk was covered by reinsurance.

The reinsurance contracts were purchased by Tokio Marine’s HCC credit insurance unit, Bloomberg reported. While it was intended for the contracts to also cover Bond & Credit Co., the required approvals were never granted, reportedly due to an internal lapse.

Sources told Bloomberg that the validity of the reinsurance may have been challenged anyway, as an underwriter at Bond & Credit Co. acted “outside the scope of his delegated authority,” according to Australian court documents. That underwriter, Greg Brereton, was fired in July.

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