German regulator mislead by Greensill on insurance deal, says IAG

Insurance deal - Mislead - keyboard button

According to the accusation, the dupe was mean tot help reduce the unit’s capital requirements.

One of Greensill Capital’s insurers has alleged that the failed lender duped German regulators regarding an insurance deal in an effort to try to shrink its Bremen-based unit’s capital requirements.

Greensill investors are currently suing the Insurance Australia Group (IAG) as they face billions in losses.

The investors have accused defunct Greensill supply-chain finance group of hiding that it did not have the insurance deal in place that they were led to believe. Instead, the investors are accusing Greensill of hiding that it had agreed to fund its own claims when it presented a credit insurance guarantee to the German regulator.

Insurance deal - Accused

IAG’s court filing earlier this month said that this strategy was “intended to deceive the regulator and was fraudulent.”

The company’s insurers are battling claims for credit insurance payouts to cover the loans issued by the failed lender and that it then packaged for its investors.

IAG denies liability in this insurance deal case, arguing that the coverage offered on its behalf was invalid.

The group’s German banking unit is Greensill Bank. Its administrator held some of the insured notes and is among the parties suing the insurers as a component of the Australian proceedings. IAG says the coverage offered on its behalf wasn’t valid and denies all liability.

IAG said in the filing that the Australian financier heading the group, Lex Greensill, arranged an insurance deal with its key underwriter, Greg Brereton, in 2018. This agreement was mean tot make it possible for the company’s Germany entity to use credit insurance to mitigate risk within local regulations.

At that time, Brereton was with the Bond & Credit Co. (BCC) underwriting agency as an executive. That agency had a 50 percent stake in IAG and issued coverage on its behalf.

In the case that Greensill Bank required a claim on the coverage, Greensill Capital would allegedly send BCC an advance of the funds, which would then be turned around within five days to pay Greensill Bank. An extension of the policy formalized this agreement, saying that IAG would be “silent as to the proposed funding arrangement,” adding that this took place without requesting its consent, according to a recent Financial Times report.

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