Premium Credit also issued Gefion with an ultimatum for cutting business ties.
The Danish Financial Supervisory Authority (DFSA) has ordered unrated Danish provider Gefion not to increase its volumes of business.
In a statement, the regulator wrote: “Due to the company’s solvency situation, the Danish Financial Supervisory Authority ordered the company not to expand its business volume.”
The decision followed on-site inspections by the DFSA. The regulator said it reviewed Gefion’s business models, solvency, capital, capital plan and management system.
It concluded that “the company’s management system deviated so significantly from the legal requirements that the company was subject to a capital add-on of DKK 39.2 million to the company’s solvency capital requirement”.
The DFSA also ordered Gefion to adjust the amounts recoverable from its reinsurance activities. Losses are expected in this area due to the default of a counterparty.
The insurer’s calculation methods were deemed “not proportional to the complexity of the risks associated with the reinsurance contracts”.
Worries over Gefion have escalated since the DFSA ordered the insurer to recalculate its solvency ratio.
Gefion had reported its solvency ratio as 130% in June 2019, but the Danish watchdog recalculated it as 105% after assessment.
In a statement, the DFSA said it “ordered the company not to use the loss-absorbing capacity of deferred taxes in its calculation of the solvency capital requirement”.
Gefion received a cash injection of DKK39.6m earlier this year, after the ratio fell as low as 72%.
In the UK, Gefion works with BCL/Cogent, Bollington, Euna, J&M, Octane, Prestige, Pukka, Staveley Head, and Tansar. All companies declined to comment on Gefion when contacted by Insurance Age.
The finance provider has removed Gefion from its list of approved insurers, effective in 45 days time.
This timeline has been extended to 90 days for clients of Bollington Underwriting and Anjuna, Bollington’s motor MGA.
Premium Credit has had Gefion under “active review” since October 2018, then-CEO Tom Woolgrove revealed to Insurance Age at the time.
Bollington reassured its clients following Premium Credit’s announcement that it is cutting ties with Gefion.
The company revealed that Premium Credit has committed to working with Gefion again, should the insurer return its solvency ratio to 135% within a fixed time period.
In a message to its brokers seen by Insurance Age, Bollington stated that it had “robust compliance procedures and processes in place to monitor all our capacity providers”.
It also questioned the reasoning behind the move: “This decision has been made by Premium Credit Limited despite Gefion Insurance A/S being a regulated entity and continuing to have the ability to transact business in the UK.”
Bollington describes Premium Credit as one of its key funding partners.
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