Denmark: Financial System Stability Assessment with reports on - IMF

2029. The performance in the non-life sector has also improved. The five largest nonlifecompanies accounted for almost 67 percent of gross premiums and the ten largest foralmost 83 percent in 2005. During the last five years, two non-life insurers experiencedserious difficulties (one due to September 11), including one company that failed. No directlosses for customers were observed, but in one case the costs for the guarantee fund has beenestimated at €16 million.30. Effective January 1, 2007, the minimum capital requirement will increase to theequivalent of the requirements in EU Solvency I Directive. Market participants are alsoanticipating increases in the capital levels in future years, when the EU continues to makeprogress on the insurance capital adequacy (Solvency II).E. Cross-Border <strong>Financial</strong> Conglomerates31. Substantial exposures to non-residents and the presence of large conglomeratesthat are active in the Nordic region poses a number of challenges (Table 6). In particular,the increasing divergence in the legal and business structure of such institutions, <strong>with</strong>centralization of key functions such as risk management abroad places a premium oncoordination and information sharing among regional supervisors. While the sectorallyintegrated supervisory structure of the DFSA facilitates effective consolidated supervision ofinstitutions incorporated in <strong>Denmark</strong>, close coordination among the Nordic supervisors andcentral banks is equally important. The systemic importance of some of the institutions alsorequires effective coordinated arrangements for provision of liquidity and crisis management.32. Arrangements for cross border coordination and information sharing are inplace but remain to be tested. The supervisory agencies in the region have forged a generalmemorandum of understanding (MoU) and there is a similar MoU at the EU level. Inaddition, there is a special agreement regarding the Nordea Group headquartered in Sweden.The Swedish <strong>Financial</strong> Supervisory Authority (FSA) is the lead supervisor for Nordea, whichis inspected by joint teams. Most of the financial groups are sizable and systemicallyimportant in at least one of the Nordic countries. It remains to be seen whether, given theirlegally non-binding nature, the MOUs would be effective in the event of a crisis involvingone of the larger institutions <strong>with</strong> substantial cross-border operations. The MOUs also do notinvolve the Ministries of Finance that ultimately may need to be involved in any crisisresolution.