The legal frameworki Sources of insurance law and regulation, supervisory authority
The Insurance Contracts Act (ICA) covers the relationship between the insurer and the insured. This is the core piece of legislation related to insurance under Swedish law. The ICA covers both commercial insurance and consumer-related insurance. It covers, inter alia, requirements on the information to be provided by the insurer to the insured, the insurance policy, limitations of insurers’ liability, the premium, insurance coverage, adjustment of claims under the policy and third-party rights under the policy.
The ICA contains no provisions covering the interpretation of insurance policies. In fact, there is no legislation covering interpretation of contracts in general in Sweden. In the absence of legislation concerning the interpretation of insurance policies, the principles of interpretation have instead evolved through legal doctrine and case law. The Supreme Court has created precedents on interpreting regarding, inter alia, exemption of liability clauses in insurance policies.
The Swedish Act on Insurance Distribution (AID) entered into force on 1 October 2018 implementing the EU Insurance Distribution Directive (IDD) into national law. The primary purpose of the IDD is to harmonise the rules for insurance and reinsurance distribution within the EU. The IDD also aims to achieve, when possible, equal competitive conditions and equal customer protection in respect of investments made directly in financial instruments compared to investments in life insurance (i.e., where the insurance premium is invested in financial instruments). The AID covers mediation of all types of insurance. The Swedish legislation goes beyond certain EU minimum rules in certain aspects. These include requirements for third-party remuneration and in relation to impartiality, as well as stricter rules on marketing.
The Insurance Business Act establishes the regulatory regime for insurance operations. The Swedish Financial Supervisory Authority (FI) is responsible for supervision, authorisation, sanction assessment, issuance of regulations, and reporting matters for the insurance industry. FI has developed regulations based on Swedish legislation. The regulations relate to, inter alia, issues regarding applications for underwriting permits, knowledge and competence requirements, employee compensation systems, and requirements related to the adjustment-of-loss process and impartiality. There are also special provisions on distribution of insurance-based investment products and certain kinds of pension insurance.ii Insurable risk
According to Chapter 6 Section 1 and Chapter 8 Section 18 ICA, compensation may be made for any legal interest covered by the insurance.
According to mandatory law, illegal interests will not constitute a basis for entitlement to insurance compensation. Thus, the insurance must not cover loss of income that has arisen illegally. Moreover, the insurance policy cannot cover any payment obligation or loss arising from public sanctions decisions such as fines, environmental sanctions or confiscation of property. However, the insurance policy may provide for, inter alia, coverage of certain kinds of loss suffered by an employer caused by illegal actions by an employee against the employer.
Certain kinds of administrative fees, such as GDPR penalties, should probably be considered non-insurable interests, with insurance against these being unavailable. However, according to certain legal doctrine it has been suggested that such administrative fees can be covered by insurance. The issue is not covered by any Swedish case law. Thus, the legal position under Swedish law is not entirely clear in this respect.
Since there are several different and mutually exclusive kinds of Swedish financial sanctions, arguments could be made that the assessment as to whether the costs for a certain financial sanction are insurable or not should be made on a case-by-case basis, taking into account, inter alia, the reasons behind the sanction concerned and the actions of the insured.
The parties are free to agree to insure any interest other than that related to pure economic loss, actual damage or personal injury (e.g., insurance against moral damage). Moreover, there is no prohibition against the enrichment of the insured. However, another issue concerns whether the insurance policy should be interpreted as providing coverage that may give rise to such enrichment.iii Fora and dispute resolution mechanisms
The ICA contains no provisions regarding disputes and litigation. Instead, litigation related to the determination and settlement of insurance indemnities is governed by the procedural rules for civil law cases laid down in the Swedish Code of Judicial Procedure.
The losing party can appeal Swedish court judgments in insurance litigation in the same way as in other civil proceedings. A judgment rendered by the district court (i.e., the court of first instance) may be appealed to the court of appeal within three weeks of the judgment being rendered. Leave to appeal is a requirement if the case is to be tried on its merits in the court of appeal. Leave to appeal shall be granted if, inter alia, there is reason to believe that the court of appeal would arrive at a different conclusion from the judgment rendered by the district court. There are certain applicable limitations preventing the parties from invoking new facts or evidence in proceedings before the court of appeal.
A judgment rendered by the court of appeal may be appealed to the Supreme Court. Leave to appeal should only be granted if a Supreme Court judgment could provide guidance for similar cases (i.e., if there is a need for a precedent). Thus, the requirements for leave to appeal to the Supreme Court are high and, in practice, the court of appeal is the highest instance in the majority of cases.
An insurance policy may stipulate that disputes between the insurer and the insured shall be settled by arbitration, depending on the kind of insurance in question. In Sweden, merger and acquisition (M&A) insurance and reinsurance policies are primarily referred to arbitration. Subrogation disputes (i.e., when the insurer has indemnified the insured and exercises subrogated rights against a third party) are sometimes settled through arbitration. This is often the case in, inter alia, disputes between the insurer and the insured’s contractor in the field of construction. As a main principle, an arbitration clause between the insured and a contractor is also applicable to the insurer in a matter of subrogation.