Greensill Downfall Spurred by Sydney Insurance Exec’s Firing
(Bloomberg) -- The debacle that led to the unraveling of Lex Greensill’s trade-finance empire began with the firing of a manager at a Sydney unit of insurance giant Tokio Marine Holdings Inc. last year.
After the July 8 dismissal by Bond & Credit Company of Greg Brereton, the firm decided not to renew credit-insurance policies covering billions of dollars of Greensill’s loans, according to Australian court documents obtained by Bloomberg. The decision helped bring Greensill Capital to the brink of insolvency this week.
Regulators and lawmakers alike are piecing together how Greensill, which was advised by ex-U.K. Prime Minister David Cameron and backed by pillars of the financial establishment, including Credit Suisse Group AG, came apart within a matter of days.
Executives at BCC and Tokio Marine didn’t respond to requests for comment. Brereton didn’t respond to a request for comment sent via LinkedIn.
The court documents were filed March 1 at the Supreme Court of New South Wales as part of a futile effort by Greensill for an injunction to keep the policies from lapsing. They suggest that Brereton, who had been head of trade credit at BCC, played a key role in helping Greensill obtain the insurance. He was dismissed for acting “outside the scope of his delegated authority,” the documents show.
Brereton’s alleged role and dismissal was earlier reported by the Australian Financial Review.
BCC’s 2020 decision not to extend Greensill’s credit insurance dovetailed with mounting regulatory scrutiny of Greensill Bank AG and its exposures to British-Indian industrialist Sanjeev Gupta. The two sets of events, thousands of miles apart, helped bring the firm to its breaking point.
The Australian company had policies with Greensill from at least early 2019, and the relationship continued after Tokio Marine bought BCC in April of that year, the documents show. According to a press release announcing that acquisition, BCC had just 24 employees and produced gross written premium of A$36 million ($28 million) in the year ended June 20, 2018.
BCC wrote more than A$10 billion of insurance policies for Greensill, which was its biggest customer, the documents show.
But trouble began to brew around May 2020 when Brereton’s employer halted further transactions and began to examine the relationship, according to the documents.
“Specific instructions were provided that no new exposures were to be bound and no extensions granted to Greensill on 28 May 2020,” a lawyer for Tokio Marine wrote in a July email. “Note that all existing limits on Greensill buyers have been set to nil in our policy system.”
Greensill’s brokers at Marsh acknowledged the new regime, yet still held out hope: “we both welcome a long term partnership with your firm,” according to an email quoted in the court filing.
The Australian Prudential Regulatory Authority and the Australian Securities and Exchange Commission are monitoring the situation.
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