Lex Greensill's finance empire formally enters administration; insurer IAG denies exposure

Australia's biggest insurance company IAG has had a rocky day on the sharemarket, as the collapse of Lex Greensill's finance empire continues to ricochet.

After intense speculation over its solvency, administrators have formally been appointed to Greensill Group.

"Greensill Capital is the parent company for the Greensill Group, and provides administration and head office support to the group but operates only in a limited capacity," a statement said.

"The joint administrators are in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets.

"As these discussions remain ongoing, it would be inappropriate to comment further at this time."

The company is headed up by its namesake, Australian billionaire Lex Greensill.

Last year, it engaged in $143 billion of financing for 10 million customers in 175 countries.

It had been making a tiding off a complex business model that provided debt coverage to companies who were awaiting payment from their customers, and then sold off this debt in bundles to other investors.

As previously reported on PortMac.News, those debt bundles were insured but this safety net started to unwind when insurance giants began to get nervous about their potential exposure to risk.

IAG takes a 10% hit then rebounds

Court documents from early March showed that Greensill unsuccessfully tried to get IAG to renew its policies in an urgent after-hours hearing in the NSW Supreme Court.

On Tuesday morning, amid ongoing speculation that IAG was exposed to risk from Greensill's collapse, the insurance giant's shareprice dived as much as 10.2% to $4.30.

The last time it was that low was back in 2012.

IAG went into a trading halt and then informed the market that it did not have exposure to Greensill.

IAG said it had previously owned a trade credit specialist called BCC that had written contracts to cover Greensill bonds, however IAG clarified that it no longer owned that entity.

"In response to market enquiries relating to Greensill exposure, IAG clarifies it has no net insurance exposure to trade credit policies including those sold through BCC to Greensill entities," it said.

"IAG sold its 50% interest in BCC on 9 April 2019 to Tokio Marine Management with the result of eliminating net exposure to trade credit insurance."

IAG resumed trade on Tuesday afternoon after making this announcement and regained some of its losses.

It closed Tuesday down almost 4% at $4.62.

That takes it back to its price in late 2020 when the insurance sector was being rattled by legal cases that could see insurers make extensive COVID-19 payouts to small businesses.