The Danish regulator says the unrated provider has “serious liquidity problems” as Gefion says it is in progressed discussions with potential capacity providers.
The Danish Financial Supervisory Authority (DFSA) has ordered Gefion Insurance not to expand its scope of business.
The regulator stated that the unrated motor provider has not complied with its solvency capital requirement.
It added that it has assessed that Gefion has “serious liquidity problems” and that it believes that the interests of policyholders and beneficiaries are at risk.
The DFSA continued: “The Danish Financial Supervisory Authority considers it inappropriate if the company tries to solve its liquidity problems through growth in gross premiums.
“The Danish Financial Supervisory Authority therefore ordered the company not to expand its scope of business.”
It added: “This includes not to commence business in countries other than where the company operates today and not to underwrite insurance products other than products that the company already has in its portfolio.”
In response, Gefion stated that the order is a result of its solvency ratio being below 100. This follows a liquidity order from the DFSA in December 2019, in which the regulator stated that Gefion needed to have liquid assets of at least €5m (£4.2m) by the end of the month.
The insurer further argued that it has been working on several solutions that will improve its liquidity position in the short-term.
It said in a statement: “These efforts have resulted in the company complying with the DFSA’s liquidity order of 11 December 2019 as per 31 December 2019.
“The company expects to be able to ensure compliance with the liquidity order during the applicable period, which runs until the end of February.”
According to Gefion, the business is in “on-going and progressed discussions” with potential capital providers in order to secure sufficient funds to meet its solvency requirement and re-establish the solvency ratio to above 100.
The insurer also stated that the order would not have any effect on its current operations.
It added: “It is important to underline that Gefion Insurance is allowed to continue to write motor insurance business as well as other lines of business already being written in all countries where the company is currently operating.”
The Danish regulator has previously ordered the provider to recalculate its solvency ratio, saying it was 105% as of 31 May, instead of the 130% Gefion posted in its solvency report in June.
In addition, Gefion was forced to take action last year after its solvency ratio dropped to 72%. This followed an earlier cash injection of €2m from its shareholders in May 2018.
In October last year, the business secured a €6m recapitalisation deal with funds managed by Fermat Capital Management.
The provider had been looking to recapitalise since the DFSA ordered it not to increase its volumes of business due to its solvency issues after it concluded an inspection of the business in July 2019.
Last week, the DFSA ordered the provider to publish supplementary and corrective information for its annual report for 2018.
In December 2019, UK-based motor MGA Pukka revealed that it had stopped writing new business with Gefion.
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