Unrated Danish insurer Gefion Insurance must have liquid assets of at least €5m by the end of the year amid fears by the regulator that the company has “serious liquidity problems.”
A summary of the regulator’s order stated: “The Danish Financial Supervisory Authority considers that the company has serious liquidity problems.
“Hence, the interests of the policyholders and beneficiaries are at risk and the Danish Financial Supervisory Authority therefore ordered the company to take the necessary measures in order to have liquid assets of at least €5m by end of December 2019 towards the end of February 2020.”
Gefion has confirmed that it is in ongoing and “open” discussions with the regulator and admitted it has seen a decline in continued business premium volumes.
It issued this statement: “Following the closure of the ordinary inspection, Gefion Insurance has seen a significant decline in premium volumes. The decline in premium volumes are due to the cancellation of poor performing agents, but also the substantial fall in volumes on continued business. The decline has been more significant than expected and in addition, non-aligned credit terms offered to reinsurers and agents have further negatively impacted the liquidity position.
“Gefion Insurance has been in on-going and open discussions with the DFSA on our current liquidity position. Gefion Insurance is working on several solutions that in the short-term will improve the liquidity position of the Company. These solutions are expected to be implemented over the course of the next two to three weeks. At the same time, discussions with potential capital providers are on-going and are expected to be finalised in the beginning of 2020.
“Gefion Insurance expects the situation to normalize, and the Company projects significant improvements resulting from the termination of loss-making portfolios as well as from improved underwriting and claims handling initiatives. Not least, we expect to see improvements from reduced credit terms. The impact of these solutions is expected to offset the decline in premium “volumes.
“The DFSA has ordered Gefion Insurance to ensure that the Company has a liquidity buffer of €5 million by year end, which is in line with our own projections. With the above initiatives and solutions, the Company is of the view that this can be achieved.”
In July the regulator ordered Gefion not to expand its business until it could secure more capital, after an inspection concluded that the insurer must impose a capital add on that meant its solvency ratio was just 86% as of 31 May 2019.
The capital injection of €6m was eventually secured months later in October of this year, from pre-existing backer Fermat.
Gefion underwrites a chunk of business in the UK and across Europe. It is understood that the insurer picked up business following the collapse of fellow Danish unrated insurer Alpha Insurance in 2018, with affected taxi drivers telling Post they had been sold Gefion policies.
Pukka, BCL and Cogent, Bollington’s Anjuna Underwriting, Euna, J&M, Octane, Prestige, Staveley Head and Tansar are all known to have used or be using capacity provided by Gefion.
Premium finance provider Premium Credit pulled out of funding further Gefion premiums earlier this year.