William Dewsall Gable

Gable has launched a full strategic review of its business after determining that it is “not possible” to raise the additional capital it needs to comply fully with Solvency II in its current form.

The company said in a trading update: “Solvency II appears to be incompatible with small niche European insurance business models.”

The company said that the review will lead to a “fundamental restructuring of the company”, which could include a sale of the company as a whole or a “substantial portion” of its trade and assets.

The unrated Liechtenstein-based insurer said it has entered discussions with “a number of different parties” and that it is maintaining a regular dialogue with its regulator, Liechtenstein’s FMA.

Gable said: “At this stage, no firm conclusions have been reached, but the exercise is expected to lead to a fundamental restructuring of the Gable business.

“The board has not restricted its considerations in any way and has not ruled out the potential sale of the company as a whole or the disposal of a substantial proportion of the company’s trade and assets.”

It added: “Whilst the board of Gable is encouraged by the range of available options and level of third party interest being shown in these, as well as the support of the FMA, there can be no certainty at this stage as to the outcome of these discussions and a further announcement will be made in due course, as appropriate.”

Gable revealed in March that it had not met Solvency II’s solvency capital requirement (SCR) by 1 January 2016 and had entered transitional measures, which allow companies an extra two years to hit the SCR.

Gable said that, as it writes small niche lines of business, its Solvency II capital calculation does not receive material benefits from risk diversification. It said that this, combined with its rapid growth, meant that its Solvency II requirement is “a multiple” of its old Solvency I requirement.

It added that its capital base is risk-weighted under Solvency II and so some funds, such as £13m of deferred acquisition costs, are disallowed under the new rules.

The announcement comes despite the announcement that sister company Hogarth Underwriting, owned by Gable chief executive William Dewsall, has agreed to contribute £10m towards to Gable Insurance AG’s regulatory capital.

In addition the restructuring, Gable also warned that its full year 2015 loss will be worse than the £7m to £8m initially expected.