The Greensill Capital saga has taken another twist as the Financial Times (FT) has reported that Euler Hermes, once one of Greensill Capital’s biggest credit insurers, has potential exposure to the fallout of the failed group due to a policy covering its German bank against business fraud.
A unit of Allianz, Euler Hermes was a key provider to Greensill Capital before it had to pay a claim last year as a result of the default of former FTSE 100 hospital operator NMC Health. Allianz’s group CFO Giulio Terzariol stated that Euler Hermes no longer has exposure to Greensill through trade credit insurance, at its Q1 2021 results conference last week, but that it did provide some “so-called fidelity insurance” which Terzariol said had not “come into play”.
The FT has today revealed that a person familiar with the matter said the Euler Hermes policy covers Greensill Bank.
The news is the latest in an ongoing series of developments since Germany’s financial regulator, BaFin filed a criminal complaint against Greensill Bank’s management for suspected balance sheet manipulation in March. BaFin said that the bank failed “to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group”, after a forensic audit by KPMG.
Bremen criminal prosecutors told the FT that five former executives of Greensill Bank are under criminal investigation and that their houses have recently been searched.
On Friday, the UK’s Serious Fraud Office started an investigation into suspected fraud at GFG, including its financing arrangements with Greensill Capital. GFG denied wrongdoing and said it would “co-operate fully” with the probe.
The claim, paid by Euler Hermes last year concerning the default of NNC, was referred to by both Greensill and the company’s adviser, former UK prime minister David Cameron, in their appearances before MPs last week, as an example of insurance working properly to protect investors from losses.
However, the FT noted that insurance experts have told the publication that the string of client defaults suffered by Greensill last year, and the loss of Euler Hermes, were key moments in the lender losing the support of the trade credit insurance market.
“In April last year, Euler had the third-largest exposure to Credit Suisse’s biggest supply chain finance fund, which packaged Greensill’s loans into investments, behind Insurance Australia and Japan’s Tokio Marine, according to a document seen by the FT,” the publication stated. “At that point, Euler underwrote 12% of the credit risk in the $5 billion fund.”
Euler Hermes is one of the “big three” credit underwriters and the FT stated that people familiar with the matter have said that the other two, Coface and Atradius, never insured Greensill.
