Zurich accuses Greensill and Gupta groups of conspiracy to deceive its underwriters

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Insurance group Zurich has accused financier Lex Greensill, steel magnate Sanjeev Gupta and certain of their companies of a “conspiracy” to deceive its underwriters and create sham debts.

The allegations form part of Zurich’s defence and counterclaim to a $400mn credit insurance lawsuit — filed in London’s High Court — arising from the collapse of Greensill Capital in 2021. The administrator for Greensill’s German banking unit is pursuing payment through the court for insurance on soured loans.

Zurich, which has refused to pay out on the insurance, contends that it is void because a key lending programme provided by Greensill Capital to Gupta companies was a “sham”, relevant information provided to it was false, and one of Zurich’s own employees had exceeded his own underwriting limits, according to court documents seen by the Financial Times.

Greensill Capital, which once boasted former prime minister David Cameron as an adviser, collapsed after it failed to extend the insurance cover that was crucial to its business of securitised loans. The episode sparked a political and financial scandal and left investors holding billions of bad debts. 

The London lawsuit is just one leg in the sprawling litigation relating to Greensill’s credit insurance: Insurance Australia Group is facing more than $4bn in gross claims and the insurance broker Marsh is also being pursued in London over its role in managing the insurance cover.

In the filing, Zurich argues that Lex Greensill, Gupta and their companies were engaged in a “fraudulent scheme” where Greensill Capital made loans on the basis of receivables owed to Gupta’s GFG companies, where “such receivables did not exist”, according to the filing. Zurich is counterclaiming against Lex Greensill, Greensill Capital, Greensill Bank, Gupta and three of the latter’s companies.

Zurich also accuses Lex Greensill of making “false” declarations on a 2020 call with the insurance group and Greensill’s broker, Marsh: it alleges that he said during the call that there was no investigation by the German regulator, BaFin, into Greensill Bank. Zurich also claims that Gupta made “false” representations in a letter to Greensill and Marsh by suggesting that there were genuine accounts receivable owed to Liberty Commodities, one of his companies.

The filing also alleges that one of Zurich’s own underwriters, Steven Kent, “acted outside the scope of his authority” in increasing the level of insurance he extended to Liberty. Kent left Zurich in 2020 and went on to become head of credit risk management at GFG Alliance. Kent previously did not reply to a request for comment from the FT.

The filing also shed more light on the reassurances given by Marsh. One broker, Edward Smith, said to Zurich in 2018 that Liberty customers named under its receivables programme “appear to be reasonable credits”.

A spokesperson for Lex Greensill said he “wholly rejects the allegations set out in the Zurich pleadings, which are without any foundation and will be addressed robustly when he files his defence and any counterclaims”.

GFG Alliance said it was “not involved in any insurance arrangements which Greensill had in place and any attempt to link us to the Greensill insurance is misplaced.”

Gupta wrote a letter to the FT in 2021 saying that “many of Greensill’s financing arrangements with its clients, including with some of the companies in the GFG Alliance, were ‘prospective receivables’ programmes, sometimes described as future receivables.”

Zurich and Marsh and a spokesperson for Greensill Bank’s administrator declined to comment.