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Tokyo Marine, the main insurance provider for the Greensill Capital supply chain, has defended its governance controls and disclosure in the midst of the decline of the Australian unit.
In an email to the Financial Times, the Japanese group said that “prudent risk management, strong corporate governance and internal controls have been the foundation of Tokyo Marine’s continued success.”
But he added that his top management was working to improve government and control processes at the Sydney subsidiary, Bond & Credit Co, after finding problems, covering billions of dollars for Greensill.
Analysts have questioned whether the improvement efforts, which the company has not described in detail, have led to the spread over the years of whether Tokyo Marine and other major Japanese insurers have installed proper controls in international subsidiaries.
Last week, Lex Greensill blamed Tokyo Marines for the fall of his company, telling British deputies after intensive negotiations he learned that the Japanese group would not renew its policies a few days before it expired in March. He told lawmakers that the Tokyo Navy’s move was “very unfortunate” and that he had “secured the collapse of Greensill” that month, even though he admitted he was too confident with his insurance company.
The acquisition of BCC by Tokyo Marine in 2019 was part of an aggressive and lengthy expansion around the world. The insurance bought a 50 per cent stake in the Australia Group. The IAG then said he exceeded his Greenensill exposure Within that sale to Tokyo Marine.
Last July, BCC plunged into a crisis when it fired one subscriber for allegedly exceeding its risk limits on Greensill and launching an investigation into his relationship with the lender. In September he formally warned that Greensill’s main policies would not be renewed.
In a presentation of earnings on Thursday, Tokyo Marine Chief Investment Officer Yoshinari confirmed that he did not expect material impact from Greensill at the event, which began in April.
The insurer said in March that was the case examining its validity insurance policies as a result of a regulated probe in Greensill. Tokyo Marine has argued that Greensill’s potential exposure was limited because a large portion of the risk was covered by reinsurance.
“We intend to continue to investigate the validity of insurance policies,” Endo said. Asked why the company did not actively provide information to investors, he replied: “There is not much change in our understanding. [of the situation] since March “.
Tokyo Marine has been closely scrutinized in recent weeks. Analysts at S&P Global Ratings said the situation found “possible flaws in the system of foreign subsidiaries and BCC’s internal controls related to the governance and monitoring system of the Tokyo Marine Group”, adding that “the group would be based on efforts to resolve problems and deficiencies.”
Hideyasu Ban, an analyst at investment bank Jefferies, said that while Japanese insurers may impose some controls, the Greensill incident means they should review not only levels of risk management but also how they should train employees in international subsidiaries.
“They need to increase the monitoring of employee behavior, especially in companies that have recently acquired companies that don’t know what Japanese companies are doing,” Ban said.
Another analyst said the incident is a “nuisance” in the record obtained by Tokyo Marine and that investors are nervous because there may be problems in other subsidiaries.
Investors in Tokyo Marine have been horrified by the lack of details about reinsurance agreements and specifically what is covered by BCC policies. The Japanese group said it has secured “accounts receivable” under Greensill’s supply chain financing agreements, but has not commented on whether it insures loans against so-called future bills.
“In addition to accepting what they tell us, it’s hard to dig deeper,” said a large investor in Tokyo Marine shares. “I don’t know what else we can do.”
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