Slovakian insurer prepares lawsuit against regulator for revoking licence
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Slovakian life insurer Novis is preparing to sue the National Bank of Slovakia following the regulator’s decision to revoke its licence to trade, arguing that the decision is “incorrect” and based on a “flawed assessment” of the company’s solvency.
On Monday, NBS announced its decision to withdraw authorisation for Novis to sell insurance “with the exception of activities necessary to enforce its claims and settle its liabilities”.
“The withdrawal of the license has no effect on the existence of the current insurance policies. Until the entry of Novis into liquidation, policyholders have insurance cover, insurance and other claims under insurance contracts,” said the Bank.
The regulator will also request a court to dissolve Novis and appoint a liquidator to start liquidation proceedings.
Novis also operates in other countries in Europe, but the decision means the company is not allowed to sell new policies anywhere because it operates based on a single valid licence within the EU/EEA.
The affected companies are: Novis Insurance Company, Novis Versicherungsgesellschaft, Novis Compagnia di Assicurazioni and Novis Poisťovňa.
Supervisors of several European countries have been informed of Slovakian regulator’s decision.
Novis: Evidence ignored
On Tuesday, Novis expressed strong disagreement with the Bank’s decision, saying it was “surprised by the number of errors it contains”.
The displeased insurer complained the NBS had ignored the evidence submitted to the regulator, including an opinion of a court expert from Vienna, “who asserts that the NBS distorted the solvency balance of Novis to such an extent that the expert used the term 'falsification' in relation to the NBS procedure”.
The firm said: “Novis is convinced that the NBS decision is incorrect and based on a flawed assessment of the facts and incorrect application of the relevant laws. The insurance company is therefore preparing an administrative lawsuit and will ask the court to postpone the effectiveness of the decision.”
While Novis cannot sell new insurance products, it stressed that coverage for existing clients and its obligation to pay out remain unchanged.
What happened to Novis?
The Bratislava-headquartered insurer has been embroiled in a string of prudential and conduct-related disputes with the Bank for some time.
The insurer’s licence was revoked “for reasons of non-compliance with the Solvency II rules regarding capital requirements, risk management and in relation to changes of terms and conditions of insurance contracts”, according to a notice published by the European Insurance and Occupational Pensions Authority.
On Monday, Fitch Ratings awarded a BB- rating to the firm’s insurance financial strength, with a “stable” outlook.
“The rating reflects weak asset/liability and liquidity management, as well as somewhat weak capitalisation and leverage, and company profile,” said the ratings agency.
Documents provided by Novis, seen by mallowstreet, show the insurer pointed to what it called “serious errors” on the part of the regulator. For instance, it said that the Bank claimed Novis failed to meet the solvency minimum capital requirement but argued the suspicion of non-compliance was “unfounded” because it was based on an incorrect assessment.
“Novis has always covered the MCR in the past and continued to so do”, the company said in a letter to the Bank’s governor Peter Kažimír in March.
The insurer also accused the regulator of “serious procedural errors” during an on-site visit by the NBS on 25 August 2022, when evidence was taken by people “who were not authorised to do so”.
The firm was also told changing its general insurance conditions was imprudent, but the insurer dismissed the claim by saying that the change was made with clients’ consent and did not affect their benefits.
In addition, Novis outlined steps to improve its solvency position such as issuing subordinated convertible bonds.
The insurer said: “Novis expects a fair process from the court.”
mallowstreet has contacted Novis and the NBS for more information.
Established in 2013, Novis provides coverage related to death, critical illness, accident and disability. It operates in several European markets including the Czech Republic, Hungary, Austria, Germany, Poland, Italy, Finland, Sweden and Iceland.
Can Novis reverse the Bank’s decision to revoke its licence?
