Japanese insurer Tokio Marine has said the insurance policies at the heart of the Greensill Capital collapse may not have been valid in the first place, as investors pressed the company to detail its exposure to the stricken lender.

Tokio Marine told the Financial Times that its remaining exposure to the London-based financial group, which filed for administration on Monday, was not large enough to warrant a revision to its guidance for the financial year ending in March.

The insurer also said its potential exposure to the supply-chain finance group was limited because a significant proportion of its Greensill-related risk was covered by reinsurance.

Since last week, investors and analysts have pressured the Japanese company for information about its exposure to Greensill, and its refusal to disclose details on “individual contracts” has fuelled frustration and concern. 

People with direct knowledge of Tokio Marine’s situation said the Greensill issue was dominating the attention of top management. They added that there was a working assumption that many of the questions being asked would ultimately be answered by expected litigation proceedings in Japan, Australia and possibly Germany.

Tokio Marine said it remained “ready to protect its interests in court as required”.

The Japanese insurer was thrust into the spotlight last week after it was sued — alongside its subsidiary BCC and Insurance Australia Group — in a failed effort by Greensill to force the extension of two insurance policies covering $4.6bn in working capital facilities. The lawsuit has since been dropped.

“Although there is no current litigation, there is an expectation that aspects of this situation will eventually go to litigation,” said one person close to Tokio Marine.

According to court documents released last week, Tokio Marine notified Greensill of its decision to stop coverage in July after it discovered that an underwriter at BCC had exceeded his risk limits, insuring amounts that added up to more than A$10bn (US$7.7bn). The underwriter was dismissed.

The financial transactions, which relate to supply-chain financing and the insurance status of which are under scrutiny, involved Greensill making payments to a given company’s suppliers and later receiving payments from that company. The insurance was written to protect Greensill against defaults on those payments. 

Tokio Marine said it was studying the validity of the insurance policies in the wake of investigations by German financial watchdog BaFin, and regarded them as open to challenge

The Japanese group stressed that the $4.6bn insurance policy was the total potential exposure, but that its actual risk was significantly smaller.

The company declined to comment on the size of its exposure but it has previously warned that it expected pandemic-related overseas losses of ¥12.3bn ($113m) for the fiscal second half, which included losses on trade credit insurance.

Koki Sato, insurance analyst at Mizuho Securities, estimated that since Tokio Marine was not planning to change this guidance after investigating the total amount of risk it faced, its losses on trade credit insurance for business transactions financed by Greensill would be in the ¥10bn range. Other analysts projected losses of up to ¥20bn.

One large shareholder has already expressed concern over the risk to Tokio Marine from Greensill’s collapse and demanded clarity from the Japanese company over what exactly it had insured, according to a person directly familiar with the matter. 

Two other fund managers that hold Tokio Marine shares, speaking on condition of anonymity, told the FT that they were looking into the matter. 

The concerns have taken on added urgency after Insurance Australia Group said on Tuesday that it had “no net insurance exposure” to Greensill-related policies and had agreed to pass any exposure, net of reinsurance, to Tokio Marine in the 2019 sale of its 50 per cent stake in BCC.

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