Greensill creditors turn focus to crucial insurance test case
Four years ago, Greg Brereton, an underwriter at a little-known Sydney insurance firm, exchanged emails with Lex Greensill, the founder of a specialist lending business that was flying high.
After requesting agreement on £23mn of insurance cover for loans to a waste plant operator based outside Hull, Greensill wrote: “Thank you, Greg, for your confirmation that the below is in order.” Five minutes later, Brereton replied: “Lex as discussed I can confirm.”
The brief interaction, included in court filings, is a glimpse of a critical relationship between the financier and the insurance executive whose firm, the Bond & Credit Co, eventually provided $10bn of coverage against the risk of default on Greensill Capital’s supply chain lending — with the financial risk held by the big global insurance and reinsurance firms sitting behind BCC.
Elsewhere, the insurer argues that when Greensill was seeking insurance coverage for lending to Catfoss Renewables — the Hull-based waste plant operator — it did not disclose that “the facility had already been drawn down and the majority of the funds used to make payments to directors of Catfoss”. It also did not disclose that Greensill had acquired an option to purchase a 25 per cent stake in Catfoss, according to the filing.
A person familiar with Lex Greensill’s view accused Tokio Marine of “trying to wriggle out of obligations that were validly placed with them” and highlighted the premiums paid for the coverage.
Further pleadings and disclosure are to come, but one key aspect of the case will be the testimony of Brereton, who has maintained public silence since the scandal broke.
Some argue Credit Suisse should not hang around for the outcome. “What Credit Suisse should be doing is repaying its clients now and recouping any losses subsequently,” said Harrison.
But people familiar with the bank’s view say regulators would force it to hold more capital against potential investor losses if it set this precedent.
Tokio Marine, Credit Suisse, Scor, and Greensill’s administrator declined to comment on the proceedings.
This story originally appeared on: Financial Times - Author:Ian Smith
