Solvency and liquidity issues have dogged the unrated Danish insurer for years, but brokers will be hoping that early regulatory intervention will have saved them a lot of pain as the insurer’s collapse continues to unfold

It came as no great surprise to the market when the Danish regulator announced it had refused to extend Gefion’s recovery period and, as a result, revoked its licence.

The troubled unrated insurer had been on the regulatory radar for some time following a string of solvency and liquidity problems.

Issues first began to surface in 2018 when the insurer called on shareholders to boost its solvency position by way of a €2m capital injection, bringing Gefion’s Solvency Coverage Ratio to 135%.

At the same time, it was revealed that Gefion had nearly doubled the size of its business to MDKK 1,784 gross written premium, around £210m, with 61% of its business placed in the UK.

And Gefion’s growth ambitions were given a further boost by the troubles experienced by fellow unrated Danish insurer Alpha. Gefion was able to take on a lot of Alpha’s business and grow faster. 

Alpha and Gefion connnection 

Alpha Insurance, which was founded by Gefion chief executive Tonny Anker-Svendsen in 2005, famously collapsed in May 2018, leaving thousands of UK-based taxi drivers without insurance unable to work.


Anker-Svendsen founded both Gefion and Alpha 

By the time of Alpha’s collapse Anker-Svendsen had already left the insurer and founded Gefion, departing Alpha in 2010 due to ‘disagreements’ about the strategic future of the business.

And it was Anker-Svendsen’s new business, Gefion, that was the insurer to provide the capacity for Cover My Cab, which stepped in to underwrite the cancelled Alpha policies.

But as with other tales of insurer collapses, Gefion’s rapid growth may have been its downfall.

The insurer’s issues came to the fore once again in June 2019 when the insurer vowed to pull business on unprofitable underwriters following a loss-making financial result for 2018.

The insurer admitted that its underwriting result was ‘unsatisfactory’ as the combined operating ratio climbed above the 100% breakeven point off the back of a near 24 percentage point increase in its loss ratio.

This worsening of Gefion’s underwriting performance was exacerbated by the beefing up of bodily injury reserves, a move made necessary following an independent actuarial review

The insurer also revealed it had received another shareholder capital injection of around £4.7m in May 2019, meaning its solvency coverage ratio stood at 130% at the time it revealed its financial results for 2018.

Solvency Issues Persist

The reasons behind this capital injection became clear when Gefion released its Solvency and Financial Condition Report (SFCR) for 2018, unveiling a solvency coverage ratio of just 72%, well short of the 100% required under the Solvency II legislation.

While this did not declare Gefion insolvent (it still achieved a minimum coverage ratio of 110%), such a solvency level would have drawn regulatory intervention, and ultimately resulted in the £4.7m cash injection detailed in the insurer’s financial results.

But Gefion’s troubles really came to a head in July 2019 when the DFSA ordered the insurer to restate its solvency position, meaning that the 130% reported in May was revised down to just 105%.

The regulator revealed that it had begun its inspection of Gefion in November 2018, and became unhappy with how the insurer was using the loss-absorbing capacity of deferred taxes to beef up its solvency ratio, with the DFSA saying it was continuing to inspect the insurer.

It was then that the writing really began to appear on the wall for Gefion, with Premium Credit announcing it would no longer finance policies where Gefion was the underlying carrier.

Just a couple weeks later and Gefion was back in the news, with its solvency coverage ratio being revised down again, this time to a lowly 86%, forcing the DFSA to order Gefion to stop expanding its business, as well as saying it needed a capital add-on of around £4.7m to its solvency capital requirement.

Come mid-October, the insurer had received further cash injections totalling €6m to be used to “strengthen Gefion’s capital base” and support its ”ongoing business in the European non-life market”.

’Serious Liquidity Issues’

This did not prove enough for the regulator, however, and the DFSA instructed Gefion to hold liquid assets of at least €5m by the end of the year, stating that the insurer had “serious liquidity issues”.

And after further restating of its finances led to a revision of its solvency coverage ratio to just 46% following reinsurance issues, Bollington finally cut ties with Gefion in February 2020 after initially offering support to the embattled insurer.

Fast forward to the end of March, and the regulator had finally started to run out of patience with Gefion’s management team, ordering the insurer to stop writing new business.

The DFSA also revealed that that Gefion’s recovery plan “did not provide sufficient evidence that the company would be able to fulfil the Solvency Capital Requirement within six months and hence be able to adequately protect the interests of current and future policyholders”.

This would ultimately pave the way for the regulator revoking Gefion’s licence and the insurer entering liquidation in June 2020.

Early Intervention

The difference with Gefion’s collapse compared to Alpha’s, however, is that regulatory intervention from the DFSA has potentially saved a lot of pain for policyholders and the brokers that represent them.

Firstly the size of the insurer was limited, initially by the order to stop expanding the business, and then by the subsequent regulatory order banning the writing of new business.

The regulator also did not consent amid Gefion’s assurances that fresh capital was on the way

The regulator would not accept the insurer’s recovery plan, nor extend the amount of time it had to comply with its solvency requirements.

In a statement on its website, Gefion insists that it is still solvent and remains able to pay claims as and when they come due - this should act as some reassurance to brokers and policyholders that Gefion will be able to wind down in an orderly fashion.

However, the multiple revisions to Gefion’s financial statements prove that the situation can move quickly and may cause some unease with brokers who have witnessed these events. 

Only time will tell if Gefion’s collapse will be an orderly one, or if further developments will once again leave brokers in the lurch needing new cover for clients.