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Tokio Marine, the main insurer of collapsed supply chain financing provider Greensill Capital, has defended its governance and disclosure controls of Australian unity at the center of the consequences.
In an emailed statement to the Financial Times, the Japanese group said that “prudent risk management, strong corporate governance and internal controls have been the basis of Tokyo Marine’s enduring success.”
But he added that his senior management was dedicated to efforts to improve governance and control processes after finding problems with its Sydney-based subsidiary, Bond & Credit Co., which provided billions of dollars of coverage to Greensill.
Improvement efforts, which the company has not described in detail, come as analysts have questioned whether Tokyo Marine and other major Japanese insurers have installed proper controls at their international subsidiaries after years of expansion.
Last week, Lex Greensill seemed to blame Tokyo Marine for the collapse of his company, telling the British MPs that after intense negotiation he discovered that the Japanese group would not renew the policies a few days before they expired in March. He told lawmakers the Tokyo Marine move was “deeply unfortunate” and “secured the collapse of Greensill” later that month, though he admitted his company had relied too heavily on an insurer.
The acquisition of BCC by Tokyo Marine in 2019 was part of an aggressive and lengthy global expansion that included the purchase of 50% of Insurance Australia Group. IAG later said yes passed his own exhibition at Greensill to Tokyo Marine as part of that sale.
Last July, BCC went into crisis when it fired an insurer for allegedly exceeding its risk limits in relation to Greensill and began an investigation into its relationship with the lender. It was formally notified that it would not renew Greensill’s major policies in September.
On Thursday, in a earnings presentation, Tokyo Marine Investment Director Yoshinari Endo reiterated that he did not expect a material impact from Greensill during the fiscal year that began in April.
The insurer said in March that yes studying validity of insurance policies following a regulatory investigation in Greensill. Tokyo Marine argues that its potential exposure to Greensill was limited because a significant proportion of the risk was covered by reinsurance.
“We plan to continue investigating the validity of insurance policies,” Endo said. When asked why the company has not actively disclosed information to investors, he replied, “There is no major change in our understanding. [of the situation] since March “.
Tokyo Marine has been under intense scrutiny over the past few weeks. S&P Global Ratings analysts have said the situation revealed “possible flaws related to Tokyo Marine Group’s governance and control system for its overseas subsidiaries and deficiencies in BCC’s internal controls,” adding that ” they would focus on the group’s efforts to solve these problems and shortcomings ”.
Hideyasu Ban, an analyst at investment bank Jefferies, said that while Japanese insurers may implement certain controls, the Greensill incident meant they should review not only their levels of risk management, but also how to educate the employees of its international subsidiaries.
“They need to intensify control over the behavior of their employees, especially in newly acquired companies that don’t necessarily know how Japanese companies work,” Ban said.
Another analyst said the incident was a “damage” to Tokyo Marine’s acquisition record and that investors were nervous about problems with the other subsidiaries.
Tokio Marine investors have criticized the lack of details about reinsurance agreements and what exactly BCC policies covered. The Japanese group has said it insured the “accounts receivable” under Greensill’s supply chain financing agreements, but did not comment on whether it secured the loans against so-called future bills.
“Aside from accepting what they tell us, it’s hard to dig deeper,” said a large investor in Tokyo Marine stocks. “I don’t know what else we can do.”
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