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State Aid

State Aid: Recapitalisation of Sjóvá approved

11.7.2013

PR(13)65

Today, the EFTA Surveillance Authority approved state aid granted for the recapitalisation of the insurance company Sjóvá following the collapse of the Icelandic financial system in 2008.

I am pleased that we are now able to approve the recapitalisation of Sjóvá. The commitments regarding Sjóvá are aimed at limiting the distortions of competition on the market without threatening the restructuring of the company. I welcome in particular the commitment of the Icelandic government to review the insurance legislation, which opens the door to more competition and better services for consumers,” said Oda Helen Sletnes, president of the EFTA Surveillance Authority.

Sjóvá is one of the leading insurance companies in Iceland. It encountered difficulties during the financial crisis due to risky investment activities. Sjóvá's main creditor, Glitnir, took over the company in early 2009 and started a restructuring process. The Icelandic state agreed to participate in the recapitalisation of Sjóvá. It took a majority stake in the company that has since been sold to a private investor.

Following the opening by the Authority of a formal investigation in 2010, the Icelandic authorities submitted a restructuring plan for Sjóvá in 2011. The plan was later updated and supplemented by commitments. On this basis, the Authority concluded that the measures in favour of Sjóvá are compatible with the EEA Agreement.

The restructuring plan shows that Sjóvá will return to viability and will be able to withstand several strict stress scenarios. Iceland also made significant changes to the regulatory framework, which were implemented by Sjóvá and improve its corporate governance and risk management.

As the previous owners of Sjóvá lost their entire share capital and its main creditors participated in the recapitalisation, the Authority finds that there is sufficient burden sharing and the issue of moral hazard has been addressed.

In order to limit distortions of competition, Sjóvá will adhere to a pricing commitment in relation to certain corporate customers. Furthermore, Sjóvá is not permitted to acquire any significant shareholdings in other financial institutions without the Authority´s approval. These limitations will stay in place until the end of 2014. Finally, Iceland will also review its legislation on insurance contracts with a view to facilitating customer switching and increasing competition in the market.

A public version of today's decision will be published in the state aid register on the Authority's website, normally within a month. 

For further information, please contact:

Per Andreas Bjørgan
Director, Competition and State Aid Directorate
tel. (+32)(0)2 286 18 36




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