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Contracts
General
What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
Insurance contracts are regulated by the Insurance Contracts Act (SFS 2005:104). Reinsurance contracts are not regulated by law, which means that the contracting parties enjoy a greater degree of flexibility. However, the Contracts Act (SFS 1915:218) and general principles of contract law are applicable to reinsurance contracts.
Contracts covering warranties, such as collision damage waivers, motor vehicle damage warranties or consumer goods warranties, are examples of ‘insurance-like’ contracts. These contracts do not normally qualify as insurance contracts and are therefore not regulated by the Insurance Contracts Act. However, the line between insurance and insurance-like contracts is sometimes unclear. For example, described warranties can entail indemnification if an uncertain and adverse event occurs.
An insurance contract that is deemed null as a result of covering non-insurable interests will also fall outside the scope of the Insurance Contracts Act.
Mandatory/prohibited provisions
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
Certain provisions of the Insurance Contracts Act are mandatory for the benefit of the insured, unless otherwise provided for in the act. In the absence of contractual terms, or if a contractual term is less favourable to the insured, the provisions of the act will apply. To avoid this, policies usually mirror the provisions of the Insurance Contracts Act.
Reinsurance contracts, by contrast, are not regulated by law, which means that there are no mandatory provisions that the parties need to observe. However, reinsurance contracts are subject to the Contracts Act (SFS 1915:218) and general principles of contract law, which means that in the event of a dispute between the parties, a provision in a reinsurance contract can be adjusted or declared as null and void by a court.
Implied terms
Can any terms be implied into (re)insurance contracts (eg, a duty of good faith)?
Certain provisions of the Insurance Contracts Act are mandatory for the benefit of the insured, unless otherwise provided for in the act. In the absence of contractual terms, or if a contractual term is less favourable to the insured, the provisions of the act will apply. To avoid this, policies usually mirror the provisions of the Insurance Contracts Act.
There is no codified principle of utmost good faith under Swedish insurance law, although the contracting parties have a general duty of loyalty. This duty is to some extent reflected in the Insurance Contracts Act through the provisions governing the insured's pre and post-contractual duty to disclose information to the insurer. In reinsurance contracts, a duty of good faith can be implied under a ‘follow the fortunes’ clause, as it involves a unique business partnership between the cedent and the reinsurer.
Standard/common terms
What standard or common contractual terms are in use?
The Insurance Contracts Act contains provisions relating to the form and content of insurance policies, but the act does not provide for any mandatory clauses to be included in insurance policies. However, insurers usually draft their respective insurance policies in accordance with the wording of the Insurance Contracts Act.
Insurers are free to set the content of their respective insurance policies, except that policies cannot cover illegal interests.
Commonly found clauses in insurance policies The following clauses are generally found in insurance policies:
- applicable definitions;
- policy period;
- insured interests;
- claims triggers;
- geographical scope;
- premium payments;
- exclusions;
- limitations of coverage, such as for increase in risk (eg, through the performance of certain activities), acting with gross negligence and breach of applicable safety requirements;
- statute of limitation; and
- general terms and conditions.
There are no provisions governing the form and content of reinsurance polices. Accordingly, the parties are free to set the terms and conditions of a reinsurance contract.
Commonly found clauses in reinsurance contracts The following clauses are generally found in reinsurance contracts:
- audit of records;
- disclosure of circumstances that may give rise to losses;
- ‘follow the settlements’ clauses;
- ‘follow the fortunes’ clauses; and
- disclosure of the risk accepted and reported claims.
'Smart’ contracts
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
‘Smart’ contracts, such as blockchain-based contracts, are still extremely rare in Sweden.
Breach
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
Remedies available for breach of an insurance policy are set out in the Insurance Contracts Act. In the event of a breach by the insured, the insurer has the following remedies:
- cancellation of the insurance policy; or
- partial or total reduction of indemnity.
Breaches of an insurance policy that give rise to remedies often involve a degree of bad faith on the part of the insured, including:
- misrepresentation and non-disclosure, including increases in risk;
- non-compliance with safety requirements;
- intentional breach of mitigation obligations; and
- fraudulent, intentional or grossly negligent acts or omissions resulting in, causing or increasing a loss.
If the insurer substantially breaches the policy or the Insurance Contracts Act, the remedies available to the insured are the cancellation of the insurance policy and/or damages.
There are no specific rules and procedures governing breach of contract in relation to reinsurance other than general principles of contract law.
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