Danish regulator orders Gefion to stop writing business

The unrated Danish motor provider says it “strongly disagrees” with the order and adds it has continued its capital raising efforts as it seeks to comply with its solvency capital requirement.

The Danish Financial Services Authority (DFSA) has ordered Gefion Insurance to stop writing new business.

The move comes after the regulator decided not to approve Gefion’s recovery plan and the order will remain in force until the DFSA can approve a new plan or Gefion complies with its solvency capital requirement.

Insurance Age reported earlier this year that Gefion had been ordered not to expand its scope of business.

Solvency
In response, Gefion stated that it “does not agree with the DFSA’s assessment” that its recovery plan does not provide sufficient evidence that it will be able to fulfil its solvency capital requirement within the six month recovery period.

It said in a statement: “Gefion Insurance has continued its capital raising efforts since the submission of the recovery plan in January with a view to restore the business to a level that will allow us to continue writing business in the short term.

“We are currently in on-going and progressed discussions with potential capital providers in order to secure sufficient own funds to meet the company’s solvency capital requirement and re-establish the solvency ratio to above 100 before the expiry of the recovery period.”

Gefion recently reported that its solvency ratio for 2018 had fallen from 72% to 49% after it published corrected information for its 2018 annual report.

Appeal
The unrated motor insurer stated that it also “strongly disagrees with the order to cease writing new business” and noted that it has appealed the decision to the Danish Business Appeals Board.

Gefion continued: “The Danish Business Appeals Board has already suspended a previous order from the DFSA, and we hope to obtain a similar outcome in this matter. In the meantime, however, we are required to comply with the order.

“It is important for us to underline that the order does not impact business that has already been written on behalf of Gefion Insurance and operations will continue as usual in relation to such business.”

Gefion further criticised the order for not being a “proportional measure which is suitable to protect the interests of our policyholders”.

It added: “The business of Gefion Insurance has already been limited following recent decisions from the DFSA and there has been no deterioration in the company’s financial position, which can justify the order.

“In fact, the company expects an improvement in the underlying business in the coming period as a result of the termination of loss-making agents and other factors.

“The company still complies with its minimum capital requirement and has so far complied with all other orders that have been issued by the DFSA.”

Agents
The Danish regulator has also told the provider to write off certain receivables from three of its agents.

It detailed that for one of the agents, Gefion can avoid write offs if it can prove that the agent is not in financial difficulties.

According to Gefion, the business has already fully written down the existing receivables towards two of the three agents mentioned by the regulator. It explained that it did not expect any further adverse developments as a result.

Gefion continued: “The agent receivables were written down as soon as the Company was made aware of the adverse financial developments for these two agents.

“With regards to the third agent, the Company is genuinely surprised that the DFSA has taken the view that receivables should be written down as there are no indications of the agent being in a financially distressed situation and the agent continues to comply with the relevant solvency requirements of the home regulator.

“In our opinion, the matter has not been fully investigated by the DFSA and we expect that the DFSA will change this part of the decision as soon as more information is provided.”

Liquidity
Last December, the DFSA published a liquidity order in which it stated that Gefion needed to have liquid assets of at least €5m (£4.2m) by the end of the month.

Insurance Age revealed in January that the business had complied with the order following further investment from its shareholders.

Gefion recently issued a response to the news that Staveley Head had gone into administration, stating that it did not prematurely terminate its contract with the business.

Steven Muncaster and Sarah Bell, both of Duff & Phelps, were appointed as joint administrators for Staveley Head on 5 February 2020.

In a statement, the global advisor said the move is a result of solvency issues at the broker’s main insurer, which led to “an early and unexpected termination of the contractual arrangement which was in place”.

In February this year, Bollington confirmed it had suspended trading with Gefion until further notice. Last December, UK-based motor MGA Pukka stopped writing new business with the Danish provider.

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