The prudential regulator had been monitoring Insurance Australia Group’s potential multi-billion dollar exposure to troubled finance house Greensill since last year, despite the insurance giant privately insisting it doesn’t carry the risk for the policies.

Two sources close to the situation but without authority to comment on the record confirmed the Australian Prudential and Regulatory Authority (APRA) had concerns about IAG Insurance Australia Limited’s relationship with Greensill, over what threatened to amount to an exposure of over $US4 billion, since November.

Sources said IAG was quick to assure APRA that while its name appears on the insurance paperwork, the risk of those policies was transferred to its former partner Tokio Marine in 2019 during its exit from its joint venture BCC Trade Credit. APRA and IAG declined to comment.

Greensill and its insurers ,Tokio Marine and IAG, settled their dispute in the NSW Supreme Court late yesterday. Earlier on Thursday, Justice James Stevenson threw out a request by one of the parties to suppress court documents relating to the case. The court documents laid bare Greensill’s problems but also allegations by IAG that the policies were signed off by an employee of an IAG subsidiary without designated authority.

Greensill’s court filings revealed it received formal notice its insurance would not be renewed in September last year and has been unable to get new cover from different insurers.

Greensill, founded in Bundaberg in 2011 and valued at $6 billion, provides a service that allows suppliers to big companies to be paid earlier for a fee. These financing arrangements are then packaged up and rolled into securities that are sold by Credit Suisse. Credit Suisse requires the debts Greensill buys from suppliers for a fee to be insured in case a big company doesn’t pay up.

Greensill has sought protection under Australia’s insolvency laws after Credit Suisse and another group GAM Holdings froze the funds that were central to Greensill’s business. That decision was fuelled by concerns Greensill was overexposed to one client, widely believed to be various entities associated with steel baron Sanjeev Gupta. Mr Gupta’s company GFG Alliance declined to comment when contacted. Only months ago Greensill was planning an initial public offering despite having recently lost big name clients Telstra and UGL.

The London-headquartered group is expected to shortly announce it has brokered a deal to sell the bulk of its business to US group Apollo Asset Management, which is expected to wipe out shareholders.

Overnight the group’s banking arm was hit with criminal charges in Germany over alleged accounting irregularities and German regulators moved in to shutter Greensill Bank.