Zurich and Allianz, two major insurers, have provided trade credit insurance policies linked to the iron ore trader Radiant World, which is currently facing legal challenges over allegations of fraudulent trading practices. The claims, brought forth by creditors in the United Kingdom and Singapore, revolve around allegedly falsified documentation underpinning Radiant’s transactions. Radiant and its founder, Pinkesh Nahar, have denied any wrongdoing.

Radiant’s difficulties have prompted concerns across the commodity trading and financial markets as parties involved seek to assess potential losses. The situation also exposes vulnerabilities within the trade credit insurance sector, which protects businesses against the risk that counterparties may fail to fulfill payment obligations. Zurich issued policies covering potential losses from non-payment involving multiple counterparties connected to Radiant, including the commodity trading giant Glencore. According to sources familiar with the agreements, Zurich’s coverage related to Radiant transactions could amount to tens of millions of dollars.

Glencore, one of Radiant’s largest trading partners, is entangled in its own dispute with Radiant. The Singapore-based iron ore trader has threatened legal action against Glencore, suggesting their relationship extended beyond standard counterparty dealings and referring to the Anglo-Swiss group as a “senior partner in the relationship.” Glencore has denied these allegations, describing them as “meritless.” Allianz Trade, a subsidiary of the German insurer Allianz specializing in trade credit insurance, also holds exposure related to Radiant, though this is reportedly smaller than Zurich’s.

Trade credit insurance has grown into a significant sector by providing protection against non-payment risks linked to global commercial transactions, particularly in commodity markets. Besides shielding commodity traders and suppliers from defaults or delayed payments, such policies are increasingly used by financial institutions to hedge against the risk of lending against outstanding invoices.

However, the market has previously faced disruption stemming from high-profile corporate failures involving fraud allegations. Notably, the 2021 collapse of Greensill Capital triggered extensive litigation, with insurers disputing claims worth billions of dollars and arguing that policies should be voided due to fraudulent activities. Typically, trade credit insurance policies cover losses caused by customer insolvency or default, while excluding certain types of fraud. Nonetheless, courts in some cases have ruled that insurers must pay out even when fraud is involved, depending on policy terms.

In response to the unfolding situation, Zurich stated that it does not hold “any material exposure to Radiant World.” Allianz and Radiant declined to comment on the matter. Industry watchers continue to monitor the case, given its potential implications for the resilience and practices of the trade credit insurance market.