Gefion sues Lloyd’s coverholder

A troubled Danish carrier ordered to review its business by regulators is now embroiled in a legal confrontation with a Lloyd’s broker.

Gefion Insurance AS, which is facing a string of orders from the Danish FSA, has filed a law suit along with bankrupt Qudos Insurance AS alleging they have together lost £8.8 million because of inefficiencies in claims management processes, reports Law 360.

They blame Lloyd’s broker Staveley Head and a UK claims management firm, Proximo Ltd, for the losses, according to the court documents.

In its defence filed at the UK High Court, Proximo has denied that work carried out was ‘substandard’.

Proximo hit back by saying that the claims sample Gefion and Qudos rely on is flawed.

Staveley Head and Proximo are accused of breach of contract and breaching duty of care, which they deny.

The companies were all once partners before they fell out. 

Claims handling

Staveley Head used to handle and settle claims for Qudos, subcontracting a large part to Proximo.

Gefion, an underwriter of UK motor insurance, was co-insurer to Qudos. Qudos is now in voluntary liquidation.

Gefion said this month it was still in the process of raising capital and meeting all the new regulatory demands.

According to Insurance Times calculations of Gefion’s regulatory filings, the Danish carrier reported UK gross premiums of around £168m for 2018, up from £130m in 2017.

Overall gross premium grew from £215m to £292m - growth of 36%.

Gefion has expanded rapidly in the UK by offering intermediaries, such as MGAs, the capacity to underwrite niche and specialist segments of the motor market such as taxis.

Although Gefion has only a minor market share of UK motor, the country’s regulators are on alert having seen a string of offshore unrated insurers collapse amid unreliable reinsurance capacity.

Alpha collapse 

Danish insurer Alpha collapsed in May last year after its reinsurance partner, CBL Insurance Limited, suffered its own solvency problems.

Alpha insured UK taxis and its bankruptcy led to chaos as thousands of British cab drivers were left without cover.

Gibraltar-based Elite was another insurer hit hard by CBL’s reinsurance troubles.

Elite, a legal expenses insurance specialist, ceased writing new business in 2017 as a result of CBL’s inability to meet its reinsurance responsibilities.

The problems have raised serious concerns among brokers.

Ashwin Mistry, chairman of UK Brokerbility, said the UK needs to move away from unrated insurers that are frequently heavily reliant on reinsurance.

He said there should be a pooled arrangement from the mainstream insures to help cover difficult risks, such as black cabs and construction professional indemnity, which are outside their traditional risk appetite.

Staveley Head told Insurance Times that it ”denies the claim in its entirety”.

”Staveley Head’s defence to the claim is not due until 13 September but full details of the defence will be available from the Court after such time,” it added in a statement.