‘Minnow’ IAG calms investors amid John Hempton’s Greensill exposure claims

IAG has sought to calm investors over its exposure to Greensill, as it came under heavy attack from noted shorter John Hempton.

A man walks past the Insurance Australia Group head office in Sydney. Picture: AAP

IAG has sought to calm investors over its exposure to Greensill, saying it has no net insurance exposure to trade credit policies, including those sold through broker BCC, to the collapsed supply chain financier.

IAG sold its 50 per cent interest in Sydney-based insurance broker BCC in April 2019 to Japan’s Tokio Marine “with the result of eliminating net exposure to trade credit insurance”, the listed insurer told the market on Tuesday, hours after it had entered a trading halt.

Following the announcement the stock initially recovered most of its earlier losses, trading down 1.2 per cent at $4.75. But by the close it had tumbled 4 per cent to $4.62. Before the trading halt the stock had crashed 10 per cent to $4.32.

Ahead of its announcement to the market, speculation had been mounting over IAG’s exposure to Greensill, with short-seller John Hempton on Monday warning it could run into the billions of dollars.

The collapsed supply chain financier relied heavily on insurance as part of its business model, lending money to companies to pay their suppliers, with insurance in place to protect it against defaults.

But the decision by its insurers to not renew its policies, which lapsed at the start of this month, led Credit Suisse to last week freeze $US10bn worth of funds associated with its financing activities.

The Australian arm of Greensill Capital was on Tuesday placed into administration after it warned overnight it was in “severe financial distress” and unable to repay a $140m loan to Credit Suisse.

Grant Thornton was appointed as the administrator of Greensill’s Australian operations on Tuesday morning, hours after the same administrator was appointed in the UK.

Clarifying it had no net exposure to the collapse, IAG said policies written by broker BCC were underwritten by its subsidiary Insurance Australia Ltd until June 2019.

“BCC is an underwriting agency that was authorised to underwrite trade credit insurance on IAG’s behalf through Insurance Australia Limited, one of IAG’s two licensed insurance subsidiaries in Australia,” IAG said.

“As part of a transition arrangement after the April sale of BCC, new policies were underwritten by IAL from the date of sale up to 30 June 2019 and Tokio Marine retained the risk for these polices, net of reinsurance.

Originally published as ‘Minnow’ IAG calms investors amid John Hempton’s Greensill exposure claims