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Market spotlight

Trends and prospects

What are the current trends in and future prospects for the insurance and reinsurance markets in your jurisdiction?

There are 347 registered insurers in Sweden. The insurance market concentrates on major companies and financial groups. In the non-life insurance sector, the four largest insurers share approximately 82% of the market.

The life insurance sector is more fragmented. The three largest insurers control 41% of the market, while seven other insurers each hold approximately 6% to 7%. During 2017 the premium income for life insurance increased to Skr262 billion, up from Skr231 billion in the previous year. The most common indemnity payments to households in 2017 were for claims relating to traffic and motor vehicles.

Some 96% of Swedish households have home insurance. The vast majority of employees have occupational pension insurance and a large part of the population also has private pension insurance. In recent years, the number of private health insurance policies has increased sharply. At the end of 2017, more than 630,000 people had healthcare insurance, which is almost double the number in 2008.

By the end of 2017, Swedish insurers' assets amounted to approximately Skr4,600 billion, which is equivalent to Sweden’s gross domestic product. Approximately 88% of that amount was attributable to life insurers. This capital is mainly invested in equities, mutual funds and bonds, but also in real estate and infrastructure.

As of 1 October 2018, Swedish (re)insurers are subject to the new Insurance Distribution Act and associated regulatory provisions implementing the EU Insurance Distribution Directive (2016/97/EU). The legislation process has been heavily criticised by, among others, industry organisation Insurance Sweden. The main points of criticism are that the implementation has been forced and provides extensive regulation by government regulations instead of law.

The following developments are foreseen:

  • Increased use of automated advice in the insurance field – the Financial Supervisory Authority (FSA) has taken a more active role in this area, investigating the pros and cons, risks and legal requirements.
  • Developments in the area of insurance technology, although not as fast as in the financial technology sector – the Swedish insurance industry and its products are very traditional, and it will take time before developments in this sector mirror those in the financial technology area. However, there have been increasing developments in this area in Sweden during the past year.
  • Brexit-related developments – it is still unclear how UK (re)insurers conducting business in Sweden will be affected. However, one possibility is that UK (re)insurers will have to apply for authorisation from the FSA and will thus be unable to rely on their current EU passports under the EU Solvency II regime.  

Reinsurance The reinsurance industry can be divided into non-life reinsurance and life reinsurance. There is currently no Swedish reinsurer (ie, a Swedish company with a licence to conduct reinsurance activities only). In the past few years, large international reinsurers have dominated the Swedish reinsurance market.

Regulatory framework

Legislation

What is the primary legislation governing the (re)insurance industry in your jurisdiction?

The Insurance Business Act (SFS 2010:2043) is the main law governing both insurance and reinsurance activities conducted by Swedish entities.

The 21 chapters in the Insurance Business Act set out the framework for:

  • authorisation;
  • operation within another member state of the European Economic Area (EEA);
  • investments and debt coverage;
  • capital base;
  • solvency capital requirements;
  • system of governance;
  • portfolio transfers; and
  • supervision.

Insurance contracts are regulated by the Insurance Contracts Act (SFS 2005:104), which is divided into four different parts:

  • Part 1 (Chapter 1) covers the scope of the act and applicable definitions and sets out a fundamental principle under which the act is mandatory for the benefit of the policyholder, its assignee and the insured, unless otherwise stated in the act.
  • Part 2 (Chapters 2 to 9) covers individual non-life insurance contracts for consumers and businesses, as well as third-party rights under insurance contracts.
  • Part 3 (Chapters 10 to 16) covers individual personal insurance, including life insurance, casualty insurance and medical insurance contracts.
  • Part 4 (Chapters 17 to 20) covers group insurance contracts relating to non-life insurance and personal insurance, including group insurance deriving from collective bargaining agreements.

Each part of the Insurance Contracts Act regulates the main requirements applicable to insurance contracts, such as:

  • the insurer's duty to provide information;
  • the policyholder's duty of disclosure;
  • rights under the insurance contract;
  • limitation of the insurer's liability;
  • premium payments;
  • claims handling; and
  • statute of limitations.

Contracts covering motor vehicle liability insurance and patient insurance are also regulated by specific national legislation.

Swedish law does not regulate reinsurance contracts.

In addition, insurers are subject to certain requirements under the Insurance Business Ordinance (SFS 2011:257) and the Financial Supervisory Authority's (FSA) regulations and general guidelines.

In addition to the legislation above, Swedish (re)insurers are, effective 1 October 2018, subject to the new Insurance Distribution Act and associated regulatory provisions implementing the EU Insurance Distribution Directive (2016/97/EU).

The Insurance Distribution Act applies to (re)insurance distribution carried out by (re)insurance undertakings and sets out certain organisational and information requirements and business conduct rules.

Regulators

Which government bodies regulate the (re)insurance industry in your jurisdiction and what is the extent of their powers?

The FSA supervises insurance and reinsurance undertakings in Sweden.

(Re)insurers that are domiciled in the EEA and conduct insurance business in Sweden via a local branch, agency or on the basis of the freedom to provide services under EU law are supervised by the authorities of their respective home member states. As the financial authority of a host member state for these undertakings, the FSA has only a limited supervisory role, covering for example claims handling and the complaints procedure.

(Re)insurers domiciled outside the EEA must apply for authorisation to the FSA to carry on insurance business in Sweden. The FSA's supervision is then limited to the insurance activities of their local branches or agencies.

Foreign non-EEA insurers are subject to the Act on Foreign Insurers and Occupational Pension Institutions Activities in Sweden (SFS 1998:293).

Ownership and organisational requirements

Ownership of (re)insurers

Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?

There are currently no restrictions on ownership or investment in (re)insurers in the sense that certain natural or legal persons would be explicitly prohibited from acquiring shares in a (re)insurer. This lack of restrictions, however, is valid as long as the natural or legal person making such an investment fulfils applicable requirements governing the assessment of qualified owners.

What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?

An acquirer must obtain the approval of the Financial Supervisory Authority (FSA) before either:

  • acquiring, directly or indirectly, 10% or more of the share capital or voting rights of an insurer or reinsurer; or
  • increasing its direct or indirect holdings to, or above, 20%, 30% or 50% of the share capital or voting rights of an insurer or reinsurer.

The FSA will approve the acquisition if both:

  • the acquirer is deemed fit and proper to exercise a significant influence over the management of the insurer or reinsurer; and
  • the acquisition is financially sound.

The FSA must provide its decision on an application for acquisition within 60 business days after the day the application is deemed complete. The assessment period can be extended if additional information is required to make a decision.

A direct or indirect owner must notify the FSA in writing if it decides to reduce its holdings:

  • in full (only if holding is equal to or greater than 10% of the company’s share capital or voting rights); or
  • below any of the thresholds listed above.

Acquisitions or increases in holdings of non-EEA insurers authorised to conduct business in Sweden are not subject to the FSA's approval. However, the FSA must be notified of proposed acquisitions and changes in control of these insurers.

Organisational requirements

Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?

(Re)insurers are required to adopt a legal structure which ensures that the company is governed in a sound and prudent manner in compliance with applicable corporate governance requirements. In general, this means that the (re)insurer shall draft and maintain a wide range of policies governing its operations, as well as implementing certain functions, in addition to a board of directors and a chief executive officer (CEO), which aims to support its internal control structure. ‘Required functions’ cover compliance, risk management, actuarial and internal audit. 

Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?

(Re)insurers are required to maintain a system of corporate governance which ensures that the company is governed in a sound and prudent manner. Requirements attributable to the system of corporate governance covers:

  • the establishment of a wide range of policies governing its (re)insurance business;
  • the procedures to ensure business continuity;
  • the implementation of certain key functions (compliance, risk management, actuarial and internal audit);
  • fit and proper requirement covering, for instance, the board of directors, CEO, any deputies for these positions and key functions;
  • a system for risk management;
  • an own-risk and solvency assessment;
  • a system for internal control; and
  • outsourcing arrangements.  

Operating requirements

Authorisation procedure

Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?

(Re)insurance business can be conducted in Sweden only after obtaining an authorisation from the Financial Supervisory Authority (FSA).

For the FSA to grant authorisation, the applicant must satisfy the following requirements:

  • Be incorporated as an entity – that is, a limited liability company, a mutual company or an association;
  • The entity's articles of association or statutes must comply with applicable legislation;
  • The proposed insurance business must comply with the requirements under the Insurance Business Act (SFS 2010:2043) and other applicable regulations;
  • All qualified owners of an applicant limited liability company must be deemed fit to exercise significant influence on the management of an insurer;
  • The proposed board of directors, chief executive officer, any deputies for these positions and key function holders must be deemed fit and proper to perform their respective duties; and
  • The applicant cannot have close links that prevent the FSA from exercising effective supervision.

The applicant must submit a wide range of information in its application, such as its articles of association, business plan, insurance technical guidelines, corporate governance policies and internal rules on anti-money laundering.

When the FSA considers that an application is complete, a decision on authorisation is normally reached within five months. However, this review period can be extended if additional information is required from the applicant during this period.

A company can apply to the FSA for an advance ruling on whether an intended business requires authorisation.

Companies authorised to conduct insurance or reinsurance business in their country of domicile within the European Economic Area are not required to apply for authorisation in Sweden. These (re)insurers are supervised by their home state authority and can conduct business in Sweden through an established branch, agency or on the basis of the freedom to provide services under EU law after fulfilment of a notification process.

Financial requirements

What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?

Each (re)insurer is obligated to calculate its minimum capital and solvency capital requirement under Swedish law. Accordingly, there is no pre-determined monetary amount to be complied with from a capital requirement perspective, except for an amount corresponding to the required guarantee that each (re)insurer needs to maintain. The amount of the guarantee varies between life and non-life insurance, reinsurance and captives. 

Do any other financial requirements apply?

A basic, general financial principle for the operation of (re)insurance business is that such operation should be pursued with an appropriate degree of solidity, liquidity and control over insurance risks, investment risks and operating risks in order to ensure that the business’s commitments to policyholders and other insured persons are at all times complied with. 

Personnel qualifications

Are personnel of (re)insurers subject to any professional qualification requirements?

A (re)insurer is required to maintain adequate policies and procedures in order to comply with the fit and proper requirements. A (re)insurer is thus required to ensure that its board of directors, chief executive officer (CEO), any deputies for these positions, the persons responsible for or conducting work within any of its key functions (compliance, risk management, actuarial and internal audit) are at all times considered fit and proper for their assignment within the company.

‘Fit and proper’ means that any person assuming a position as covered by the previous paragraph should fulfil the following requirements:

  • His or her professional qualifications, knowledge and experience are adequate to enable sound an prudent management (fit); and
  • He or she is of good repute and integrity (proper).

The board of directors should also be assessed collectively, meaning that its member collectively shall possess appropriate qualification, experience and knowledge about, at least:

  • the insurance and financial markets;
  • the business strategy and business model;
  • the system of governance;
  • financial and actuarial analysis; and
  • the regulatory framework and requirements.

In addition, there is a general requirement for (re)insurers to have procedures in place for assessing the skills, knowledge, experience and personal integrity of relevant personnel other than the ones covered in the first paragraph.

Business plan

What rules and requirements govern the business plans of (re)insurers?

A (re)insurer is required to establish a business plan for authorisation purposes. Such a business plan shall consist of the following:

  • information about:

o the type of risks or commitments that the (re)insurer’s business is going to include, divided according to applicable classes of insurance;

o estimated number of employees and a schedule over the company’s organisation;

o the company´s system of governance;

o basic principle for issued and received reinsurance;

o the items in the tier 1 capital that correspond to the minimum capital requirement;

o estimated costs for building an administration and other  necessary business functions, as well as for the purpose of capital deposits; and

o the main content of the policies and guidelines that will govern the company´s business;

  • prognoses in relation to financial requirements; and
  • estimates of the minimum and solvency capital requirements, the funds intended to cover the technical provisions, minimum capital and solvency capital requirement.

Depending on the type of (re)insurance business to be performed by the company additional requirements may apply in relation to the business plan. 

Risk management

What risk management systems and procedures must (re)insurers adopt?

A (re)insurer is required to have a policy governing its risk management system. Such a policy should comprise information about the following risks: underwriting and reserving, asset-liability management, investments, liquidity and concentration risk management, operational risk management, reinsurance and other risk-mitigation techniques.

Furthermore, the risk management system should contain the strategies, processes and reporting routines needed to ensure that the company can, on a continuous basis, identify value, and manage and report risks, as well as dependences between such risks. 

Reporting and disclosure

What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?

A (re)insurer is required to provide a wide range of reports, both for supervisory and disclosure purposes.

Generally, a (re)insurer is required to provide the following reports for supervisory purposes to the FSA on an ongoing basis:

  • solvency and financial condition report;
  • regular supervisory report;
  • own-risk and solvency assessment; and
  • annual and quarterly quantitative templates.

The solvency and financial condition report is also subject to public disclosure. Where a (re)insurer is part of a group, as defined in applicable legislation, additional reporting requirements may apply at group level.

Other requirements

Do any other operating requirements apply in your jurisdiction?

N/A.

Non-compliance

What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?

The FSA supervises (re)insurers’ compliance with the Insurance Business Act (SFS 2010:2043). If a (re)insurer fails to comply with the applicable requirements, the FSA can:

  • order the company to take corrective actions;
  • issue prohibitions on the making of executive decisions;
  • issue comments;
  • in cases of serious violations:

o impose limitations on, or prohibit, the disposal of the (re)insurer's assets in Sweden;

o revoke the authorisation to carry on insurance/reinsurance business; or

o issue a warning;

  • impose fines of between Skr5,000 and Skr50 million.

The FSA can refrain from intervening in cases where the violation is excusable or the (re)insurer is taking corrective actions.

If a non-approved entity conducts (re)insurance activities, the FSA can order the entity to cease its activities under a penalty. If the non-approved entity does not comply with the order, the FSA can apply for liquidation of the entity.

Where a policyholder entered into an insurance contract with a non-approved entity, that contract will be deemed unenforceable. In principle, the policyholder will be entitled to a refund of all sums paid and to compensation for any loss incurred.

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.

Consumer protection

Regulation

What consumer protection regulations are in place to safeguard the rights of purchasers of insurance products and services?

Customer protection regulations are mainly found in the Insurance Contracts Act, covering a range of mandatory provisions for the benefit of the policyholder, its assignee and the insured. Accordingly, a court will set aside a clause in an insurance contract that contradicts the Insurance Contracts Act.

The Insurance Contracts Act contains provisions regarding, among other things, information to be provided to a policyholder in relation to the inception of an insurance policy and otherwise. Remedies for breaches in this respect are regulated in the Marketing Practices Act (SFS 2008:486).

Where an insurance contract does not explicitly contradict the provisions of the Insurance Contracts Act, the court can, at its own discretion, set aside any contractual clause that it deems to be manifestly unreasonable. However, these decisions are rare in insurance cases. 

Claims

General

What general rules, requirements and procedures govern the filing of insurance claims?

To claim coverage under an insurance policy, an insured event must occur. ‘Insured events’ are defined in the applicable insurance policy and differ depending on the type of insurance. For example, coverage by non-life insurance, such as car insurance, is usually triggered on the occurrence of a specific event. The insured bears the burden to prove that an insured event has occurred and the insurer generally has the burden to prove that, for example, an exclusion applies or the indemnification should be reduced due to the insured's breach of the insurance contract. Evidential requirements are lower where a consumer claims indemnification.

The policy can specify a time period during which a claim must be notified. The remedy for late notice is a reduction in the indemnification proportionate to any loss incurred by the insurer due to the late notice. A statute of limitation always provides an ultimate deadline to notify a claim.

In the case of business insurance, the insurer is entitled to deny a claim if the insured has failed to notify the insurer within one year of the occurrence of the insured event, provided that the policy contains a clause to that effect. 

Time bar

What is the time bar for filing claims?

In consumer insurance, the insured must bring legal proceedings against the insurer within 10 years of the date when the claim was triggered according to the insurance policy. Thus, the limitation period could be interrupted only by making a claim to the court or where applicable by a request for arbitration. If a claim has been notified to the insurer within that timeframe, the insured must have at least six months to bring legal proceedings from the date of receipt of the insurers' final decision.

Insurers can shorten the limitation period in non-consumer (business) insurance, and can deny a claim for indemnity if the insured does not notify the claim within one year of the date of the event triggering the claim. In addition, the insurer can order the insured to commence proceedings within one year of the date of receipt of the final decision reached by the insurer.

An insured that fails to comply with the timeframe outlined above loses its right to indemnity.

Reinsurance contracts are not covered by the Insurance Contracts Act. Therefore, the time limit for making a claim is set out in the reinsurance contract. Claims for reinsurance indemnification are subject to the ordinary statute of limitations in the Swedish Limitations Act. The limitation period could be interrupted by a written demand, for instance.

Denial of claim

On what grounds can the (re)insurer deny coverage?

Usually, an insurer may deny a claim where:

  • the insured event is not covered by the policy;
  • a claim is time barred;
  • the insured has acted fraudulent; or
  • the insured is otherwise in breach of contract.

However, the Insurance Contracts Act provides certain restrictions for an insurer to deny a claim in full due to the insured’s breach of contract. In most cases, a breach of contract would result in a partial reduction of indemnity.

Whether a reinsurer has the right to deny a claim generally depends on the boundaries of the reinsurance contract and the cedents’ actions in relation therewith.

What rules and procedures govern the insured’s challenge of the denial of a claim?

Insurers are required to have internal procedures for the management of consumers' complaints.

Insurers usually have internal procedures for the management of disputes relating to claims decisions (eg, in the form of a review committee). However, these internal procedures are not regulated by law and are therefore not mandatory.

Third-party actions

On what grounds can a third party file a claim directly with the (re)insurer?

Under the Insurance Contracts Act, a third party may in some cases be entitled to receive indemnity under an insurance policy ahead of the insured (eg, where a third party has a secured interest in the policyholder's insured property).

Where there is a statutory requirement to hold liability insurance, a third party is entitled to bring a claim directly against the insurer. Insurance intermediaries, accountants and real estate agents are, among others, required to hold liability insurance. Motor vehicle insurance is subject to the same rules.

A third party can also claim directly against the insurer under a liability policy if any of the following applies:

  • The insured is bankrupt;
  • The insured has been dissolved (in the case of a legal entity).
  • A court has ordered the public liquidation of the insured.

Punitive damages

Are punitive damages insurable?

Punitive damages are not awarded under Swedish law. However, punitive damages are both insurable and reinsurable under Swedish law.

Subrogation

What regime governs (re)insurers’ subrogation rights?

According to the Insurance Contracts Act, an insurer has a right of subrogation to the insured's claim for damages resulting from loss, if the claim is covered by the insurance policy and has been indemnified by the insurer. It is also common for the insurance policy to contain a subrogation clause, which could cover any and all claims for which the insurer has indemnified the insured (ie, not only the insured’s claim for damages). The insured’s claim against a third party may also be transferred to the insurer.

Intermediaries

Regulation

How are the services of insurance intermediaries regulated in your jurisdiction?

Sweden has implemented the EU Insurance Distribution Directive (2016/97/EU) into national law, effective 1 October 2018. Following the implementation, insurance and reinsurance intermediaries are subject to certain requirements (eg, in relation to establishment, operation and supervision) under:

  • the Insurance Distribution Act (SFS 2018:1219);
  • the Insurance Distribution Ordinance (SFS 2018:1231);
  • the Financial Supervisory Authority´s regulations on insurance distribution (FFFS 2018:10); and
  • European Insurance and Occupational Pensions Authority guidelines.

Tax

Tax liability

What tax liabilities arise in the conduct of (re)insurance business?

Life insurers are taxed in accordance with the general rules on income tax and the special rules on the taxation of returns on pension funds.

Non-life companies and reinsurers are taxed as if they were regular limited liability companies, except that they are entitled to deductions for insurance technical deposits.

The main rule is that insurance products are exempt from insurance premium tax, except for motor vehicle insurance.

Insurance and reinsurance premiums are not subject to value-added tax.

Insolvency

Regulation

What regime governs the insolvency of (re)insurers?

The insolvency regulatory framework for (re)insurers mainly follows the general rules of Swedish bankruptcy laws. If a (re)insurer's equity is less than half of its share capital, it may be forced into compulsory liquidation. In the case of bankruptcy or compulsory liquidation, the Financial Supervisory Authority must revoke the (re)insurer's authorisation and (in the case of bankruptcy) appoint a special receiver for its administration.

A (re)insurer that has entered into liquidation or bankruptcy cannot enter into new insurance contracts. Life insurers must, if possible, transfer existing risk portfolios to other insurers.

If a (re)insurer enters into bankruptcy or is not in a position to perform its obligation towards the insured for other reasons, the insured can terminate the policy. The insured may also be entitled to damages for any loss incurred. Claims for damages are unsecured claims, while indemnity claims under insurance or reinsurance contracts are secured claims.

Effect on insureds

How does a (re)insurer’s insolvency affect insureds and the (re)insurer’s obligations to insureds?

If a (re)insurer enters into bankruptcy or is not in a position to perform its obligation towards the insured for other reasons, the insured can terminate the policy. The insured may also be entitled to damages for any loss incurred. Claims for damages are unsecured claims, while indemnity claims under insurance or reinsurance contracts are secured claims.

Dispute resolution

Litigation

Are there any compulsory or preferred venues for insurance litigation in your jurisdiction?

There are no compulsory venues for insurance litigation. Claims for coverage are usually, in the first instance, handled by the district court where the insurer is domiciled. The largest insurance carriers in Sweden are domiciled in Stockholm.

Consumers may also defer coverage disputes to the National Board for Consumer Disputes (ARN). ARN’s rulings are not binding, but the majority of insurers comply with them. It usually takes about six months from the claim to a decision.

Reinsurance disputes are generally subject to arbitration.

How are insurance disputes with a cross-border element handled in your jurisdiction?

There is no specific regime for the handling of cross-border disputes. Larger claims with cross-border elements are often subject to arbitration.

What issues are commonly the subject of insurance litigation?

Even though insurance litigation is not as common in Sweden as in other jurisdictions such as the United States or even the United Kingdom, most of the major Swedish insurers are regularly involved in litigation and have departments for handling litigation.

A vast array of issues is subject to insurance litigation and these issues vary from time to time, but some of these issues can be highlighted.

Regarding personal insurance, litigation often involves claims for bodily injury resulting from car accidents (eg, whiplash). It is common for the claims to regard the calculations for pain and suffering and also annuity payments for lost income. Litigation in these types of claim has however somewhat decreased in number over the past 10 years or so.

Regarding property insurance, Swedish insurers are frequently subject to litigation resulting from denial of claims where the insurer has invoked that the insured event has been caused by the insured (eg, fraud-like situations). It is common for these claims to involve car insurance where the car has been damaged by fire, but also fires in business premises such as restaurants.

For business insurance, a number of cases concern the reduction of the indemnification due to breaches of safety regulations in the policy (eg, absence of approved locks and shortcomings in relation to fire safety provisions).

For major losses, litigation often involves coverage issues such as the scope of the insurance or the applicability of any exclusion.

As Swedish liability insurances often include a duty for the insurer to defend the claim, Swedish insurers are often involved in defending claims by the injured party or the injured party’s insurer in recovery claims.

What is the typical timeframe for insurance litigation?

It is difficult to provide an exact timeframe for insurance litigation as it depends on, among other things, the complexity of the case and the number of cases handled by that particular court. Generally, though, it would take about one and a half year to obtain a judgment from a district court. 

Arbitration

What regime governs the arbitrability of insurance disputes?

The statute governing arbitrability of insurance litigation is the Swedish Arbitration Act (1999:116). Arbitration clauses in insurance and reinsurance contracts are both common and enforceable, although not for consumer insurance (save for certain types of group insurance).