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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 insurance 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 insurance 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 insurance 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:
- by 10% of the share capital or voting rights of the company; 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.
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.
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 insurance and reinsurers 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.
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.
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.
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:
- the type of risks or commitments that the (re)insurer’s business is going to include, divided according to applicable classes of insurance;
- estimated number of employees and a schedule over the company’s organisation;
- the company´s system of governance;
- basic principle for issued and received reinsurance;
- the items in the tier 1 capital that correspond to the minimum capital requirement;
- estimated costs for building an administration and other necessary business functions, as well as for the purpose of capital deposits;
- 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.
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.
Do any other operating requirements apply in your jurisdiction?
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:
- impose limitations on, or prohibit, the disposal of the (re)insurer's assets in Sweden;
- revoke the authorisation to carry on insurance/reinsurance business; or
- 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.
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