Sweden: Insurance & Reinsurance

The writing of insurance contracts in Sweden is regulated by the Insurance Contracts Act (SFS 2005:104) (ICA). The framework is divided into four parts which regulate the following:

Part one: Introductory provisions

Part two: Individual Liability Insurance

Part three: Individual Personal Insurance

Part four: Group Insurance

The ICA is mandatory for the benefit of the policyholder and the insured, unless otherwise provided by law. Certain types of insurance are exempt from the mandatory application of the ICA, such as i) marine insurance, other transportation insurance or aircraft insurance which is not consumer insurance, ii) credit insurance and iii) group non-life insurance. In addition to the ICA, insurance contracts are also subjects to the Contracts Act (SFS 1915:218) and, where relevant, the Consumer Contracts Act (SFS 1994:1512) or the Terms of Contract between Tradesmen Act (SFS 1984:292).

A Swedish company may conduct insurance or reinsurance business in Sweden only after having been duly authorized by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) (the SFSA) pursuant to the Insurance Business Act (SFS 2010:2043).

Life insurers are defined as “insurance undertakings carrying on exclusively or almost exclusively the business of direct insurance or reinsurance of life assurance”. Every insurer that is not a life insurer is a non-life insurer. Reinsurer is an insurer that has received authorisation for the sole purpose of reinsurance. There are separate licenses for life, non-life and reinsurance activities, and different minimum capital requirements. Non-life and life insurance activities cannot be carried out by the same undertaking, as an entity may only obtain a license to perform one type of insurance activity (except that life insurance undertakings may obtain authorisation for short term health and accident insurance). All Swedish insurance undertakings are regulated by the same legislation, i.e. the Insurance Business Act, the Commission Delegated Regulation (EU) 2015/35 (the Solvency II Regulation) and regulations and general guidelines issued by the SFSA and EIOPA.

A Swedish company may conduct occupational insurance business only after having been duly authorized by the SFSA pursuant to the Occupational Pension Undertakings Act (SFS 2019:742) (IORP Act), implementing directive (EU) 2016/2341 of the European Parliament and of the Council on the activities and supervision of institutions for occupational retirement provision. All occupational insurance undertakings are regulated by the IORP Act and regulations and general guidelines issued by the SFSA and EIOPA.

Yes, insurance intermediaries, ancillary insurance intermediaries and insurance undertakings are subject to the Insurance Distribution Act (SFS 2018:1219). The Insurance Distribution Act implements the Insurance Distribution Directive (EU) 2016/97 (IDD) in a directive confirm way, including the exemptions for large risks and reinsurance. There are however some areas where the Swedish legislator and the SFSA have exercised the possibility to implement stricter requirements than as set out in the IDD (gold plating). Such gold-plated provisions include stricter requirements regarding knowledge and competence requirements for employees, professional indemnity insurance, internal policies and procedures and complaints’ handling. In addition, certain provisions regarding remuneration are stricter than as set out in the IDD.

A Swedish company wishing to conduct insurance business in Sweden must be duly authorised by the SFSA pursuant to the Insurance Business Act. An authorisation can be granted to an insurance company limited by shares (Sw. försäkringsaktiebolag), a mutual insurance company (Sw. ömsesidigt försäkringsbolag) or an insurance association (Sw. försäkringsförening).

A Swedish company wishing to conduct occupational insurance business (IORP business) in Sweden must be duly authorized by the SFSA pursuant to the IORP Act. An authorisation may be granted to an IORP company limited by shares (Sw. tjänstepensionsaktiebolag), a mutual IORP company (Sw. ömsesidigt tjänstepensionsbolag) or an IORP association (Sw. tjänstepensionsförening).

Authorisation to conduct insurance or IORP business in Sweden is granted by the SFSA when the requirements defining insurance business (or, as applicable IORP business) are satisfied. A key criterion is that undertaking shall have a capital base that meets the solvency capital requirements initially and during the first three years. The capital base may never be less than the minimum capital requirement which for non-life insurers is EUR 2.5 million or EUR 3.7 million depending on what is insured at what risk and for life insurers is EUR 3.7 million. Moreover, for an authorisation to be granted, the applicant’s articles of association must be compliant with the Insurance Business Act or the IORP Act and the proposed business shall be deemed compliant with the relevant laws and regulations regarding the business of the applicant. In addition, the qualifying holder or holders of shares in an insurance or IORP undertaking must be judged to be appropriate to exercise a significant influence over the management of the undertaking, which includes considerations governing good standing and capital strength of the qualifying holder(s). Furthermore, the persons involved in the management of, or in charge of, key functions, must possess the knowledge and experience deemed to be sufficient as well as being considered as fit and proper persons in this respect.

The SFSA target processing time is five months from the date the application is complete, and the application fee has been paid.

Insurance intermediaries require a license from the SFSA in accordance with the Insurance Distribution Act. The SFSA target processing time is three months from the date the application is complete, and the application fee has been paid. Tied insurance brokers do not need a license from the SFSA but shall be registered with the Swedish Companies Registration Office.

Yes, a direct or indirect acquisition of shares in an insurance company, which results in the acquirer’s total holding constituting a qualified holding, requires authorisation from the SFSA. A qualified holding is a direct or indirect holding in a company which represents 10 per cent or more of the capital or voting right or which otherwise makes it possible to exercise a significant influence over the management of the company. The same requirements apply to acquisitions that increase a qualifying holding so that it amounts to or exceeds 20, 30 or 50 per cent of the share capital or the voting rights or so that the insurance company becomes a subsidiary. Authorization must be sought prior to acquisition.

Authorization shall be given if the acquirer is deemed suitable to exercise a significant influence over the management of the insurance company if it can be assumed that the acquisition is financially sound. Consideration shall be given to the likely impact of the acquirer on the insurance undertaking.

The assessment is made on the basis of information submitted by the company, as well as information from the Swedish Enforcement Authority (Sw. Kronofogden), the Swedish Companies Registration Office (Sw. Bolagsverket), the Swedish Tax Agency (Sw. Skatteverket) and the police. If necessary, information is also obtained from foreign supervisory authorities. If a permission for an acquisition is granted, the SFSA may decide that the acquisition must be carried out within a certain period of time.

It is possible for third country insurer to cover risks in Sweden without a license or authorisation, but only on a strict non-solicitation basis (i.e. provision of insurance services on the sole initiative of the client).

An insurer domiciled in another EEA country cannot exercise the non-solicitation exemption. In order for an EEA insurer to cover risks in Sweden it must either conduct business in Sweden on a freedom of services or a freedom of establishment basis.

Yes, insurers, IORP undertakings and insurance intermediaries domiciled in the EEA the so-called single-license principle applies, meaning that insurance companies who has registered office and license in another member state may conduct business in Sweden under the freedom to provide services or freedom of establishment.

Insurers and insurance intermediaries domiciled outside the EEA are subject to more restrictive regulations. They may conduct business in Sweden only if they have obtained a license and their business may be conducted through an agency or a branch. A third country insurer must make a major deposit is made with a Swedish bank. Agreements between Switzerland and the European Union enable Swiss non-life insurance undertakings to be authorised to establish either an agency or a branch in Sweden without a deposit. In addition, an insurer domiciled outside the EEA may, after authorisation from FI, market insurance for risks located in Sweden. Insurers domiciled outside the EEA that have been authorized to conduct business from a secondary establishment in Sweden are subject to supervision by the SFSA in respect of this business.

If the SFSA has reason to believe that a foreign undertaking conducts insurance business in Sweden without being entitled to do so, the SFSA shall order such undertaking to provide information about the activity necessary for the SFSA to assess whether the Act on Foreign Insurers and Institutions for Occupational Retirement Provision in Sweden is applicable. If this is the case, and the company has not fulfilled the requirements stated in such act, the SFSA may order the company to change its activities or cease the activities. The SFSA shall forthwith inform the competent authority of the home state.

Where a party conducts insurance distribution in Sweden without being entitled to do so, the SFSA shall order such party to cease its activities. The aforesaid shall also apply where an insurance distributor distributes insurance of a type which it is not entitled to distribute. Where it is unclear whether the activities fall within the scope of the Insurance Distribution Act, the SFSA may order the party conducting the activities to provide any information regarding the activities as is necessary for an assessment of whether the Insurance Distribution Act is applicable.

In general, the SFSA’s supervision is currently very rigorous in respect of compliance with anti-money laundering rules. During the last couple of years, the SFSA has issued fines against several banks and financial institution for non-compliance with the anti-money laundering rules.

With respect to the insurance sector specifically it can be noted that the SFSA has the last few years issued fines against insurers regarding non-compliance with governance requirements (outsourced operations, independence in key functions, conflicts of interest and sound and prudent management) and non-compliance with rules regarding calculation of technical provisions. Key areas of the SFSA’s focus is currently product oversight and governance and related compliance with key consumer protection rules, and conflict of interests in the distribution of life insurance caused by remuneration models.

Insurers and reinsurers must have a capital base that covers the solvency capital requirement (SCR) and the minimum capital requirement (MCR). The SCR is a formula-based figure calibrated to ensure that all quantifiable risks are considered. This includes such risks as risks related to non-life underwriting, life underwriting, health underwriting, market, credit, operational and counterparty risks. The purpose of the SCR is to ensure that both insurers and reinsurers will be able to fulfil their obligations towards policyholders and beneficiaries during the forthcoming twelve months with a 99.5 per cent probability. The purpose of the MCR is to establish a bottom line that no insurer or reinsurer may go below.

The SCR may be calculated with the application of a standard formula or an internal model approved by the SFSA. The frequency of the calculation is a least once per year. The results must be reported to the SFSA. In addition, the (re)insurance undertaking shall without delay inform the SFSA if the undertaking does not fulfil the solvency capital requirements or there is a risk that the undertaking may not fulfil such requirements within the next three months.

The minimum capital requirements for Swedish (re)insurance companies are based on the EU Solvency II Directive and is regulated in the Insurance Business Act. The regulations require that the minimum capital shall be calculated to ensure with an 85 per cent probability that overall losses over a period of 12 months will cover the calculated capital requirement. The minimum capital requirement shall not be less than 25 per cent or more than 45 per cent of the solvency capital requirement and shall never be less than the start-up capital requirement. The start-up capital requirement is EUR 3.7 million for life insurance undertakings and undertakings with risks relating to motor vehicle, aircraft, ship and general liability, credits and guarantee insurance. For other non-life insurances, the amount is set to EUR 2.5 million.

No, Sweden has no insurance guarantee system or similar schemes in place.

In accordance with the EU Solvency II Directive, implemented by the Insurance Business Act, groups are subject to supplementary supervision in addition to the solo supervision of individual insurance companies. Insurance groups are subject to specific requirements with regards to consolidation of solvency, reporting of risk on a group level to the SFSA, risk assessment and internal audit, market reporting and disclosure of group structure.

Yes, (re) insurance undertakings shall ensure that whoever is a member of the supervisory board, director of the company, or a replacement for any of them, or any person who is responsible to perform a central function in the company has the knowledge and experience which must be required of a person involved in the management of an insurance company. This person must be suitable for such task as well.

Any subsequent changes to the senior managers must, as soon as possible, be reported to the SFSA. The SFSA carries out a suitability assessment of the person in the light of, among other things, data collected from the Swedish Enforcement Authority (Sw. Kronofogden), the Swedish Police Authority (Sw. Polismyndigheten), the Swedish Information Centre (Sw. Upplysningscentralen) and the Swedish Tax Agency (Sw. Skatteverket). If the assessment concerns a foreign citizen, information is obtained from the supervisory authority in the person’s home country. The SFSA shall also be noted if a senior manager has been replaced claiming the person no longer fulfils the suitability requirements. Changes of the managing director and the managing director’s deputies must be registered at the Swedish Companies Registration Office (Sw. Bolagsverket).

It is the undertaking that is held liable for regulatory breaches. In respect of certain non-compliance (e.g. breach of anti-money laundering rules and non-compliance with consumer protection rules in the Insurance Distribution Act), members of the board or the managing director of the undertaking may however be subject to an intervention by the SFSA. The SFSA could issue an order that the person in question may not perform a management function with an insurance distributor or impose a punitive fine against such person.

According to Insurance Business Act, a Swedish insurance undertaking must have its head office in Sweden. Further, an insurance undertaking’s priority register must be kept at its head office. In addition, not less than one-half of the members of the board of directors shall be resident within the EEA.

For a foreign company’s branch in Sweden, the managing director shall be resident within the EEA, unless otherwise permitted in an individual case by the Swedish Companies Registration Office.

Other than that, there are no specific requirements on presence related to insurance activities in Sweden.

Yes, there are restrictions on outsourcing services relating to the insurance business, and other. The Insurance Business Act stipulates that insurance undertakings are required to have written instructions in relation to outsourcing and that the insurance undertaking must notify the SFSA if it intends to outsource “critical or important functions or activities” of its business. Article 274 of the Solvency II Regulation contains detailed restrictions regarding, inter alia, the terms and conditions of the outsourcing contract. Further issues relating to outsourcing are addressed in the EIOPA guidelines on system of governance and the EIOPA guidelines on outsourcing to cloud service providers.

An insurer’s assets must be invested in a prudent manner. In event of a conflict of interest between the insurer and the policyholders, the assets shall be invested in the manner which serves the interests of the policyholder and others entitled to benefits. Investments may only be made in financial instruments and other assets whose risks can be identified, measured, monitored, managed, controlled and reported. The investments must be considered as appropriate in its own risk and solvency assessment.

Investments in financial instruments and other assets shall be made in such way as to achieve an appropriate spread of risk and invested in such a way that the company’s solvency is satisfactory and the expected return sufficient. Moreover, the assessments must be stored in such manner that they are accessible.

Investments in assets not admitted to trading on a regulated market shall be kept at prudent levels. In addition, assets must be invested in an appropriate manner to the nature and duration of the commitments and in a manner best suited to the interest of the policyholders, in the light of the investment objectives set and published. However, insurers are limited by the prohibition of non-permissible activities requirement.

The insurer must keep a register of the assets which also shows if an asset entered in the register has been lent with such right that its full value cannot be used to cover technical provisions. In addition, a life-insurer must develop a policy on how investments are made.

Sales of insurance products are governed by the Insurance Distribution Act. The SFSA is responsible for the supervision of Swedish and foreign insurance distributors’ insurance distribution in Sweden. In addition, the SFSA supervises Swedish insurance intermediaries that conduct insurance distribution in another country within the EEA.

Insurance distributors are not required to submit any periodic reporting to the SFSA regarding the insurance distribution. Insurance distributors operating in Sweden are however obliged to provide the SFSA with the information on their activities and related matters that is requested by the SFSA. The SFSA may, where it considers it necessary, carry out an investigation at the premises of an insurance distributor, an EEA insurance intermediary operating in Sweden or an insurance intermediary from a third country.

EEA insurers and EEA insurance intermediaries can actively market the sale of insurance in Sweden on a cross border basis, subject to complying with the applicable passporting rules. EEA insurance distributors shall comply with relevant parts of the Insurance Distribution Act and EEA insurers shall also comply with the Act on the Activities of Foreign Insurers and Occupational Pension Institutions in Sweden (SFS 1998:293). The representative of the foreign insurer shall supervise that the insurer complies with good insurance standards in its operations in Sweden.

Regarding distance and off-premises consumer contracts, the Act on Distance Contracts and Contracts off-premises (SFS 2005:59) apply. According to the requirements stated in such act, a consumer can withdraw from a purchase of insurance at distance within 14 days without giving a reason. This includes online purchases. Among other things, the insurance distributor must provide the consumer with certain information, adapted to the sales method, before entering a contract. This means, if the insurance distributor uses telephone sales it can give the information orally, whereas in an online sale it can give information in the general terms and conditions. For both distance and off-premises contracts, the insurance distributor must give the consumer a confirmation of the purchase. The confirmation must be given in a legible and durable form and must contain, among other things, the withdrawal form and information on the right of withdrawal, if the form and information have not already been provided in the correct form.

Consumer policies are subject to several restrictions under Swedish law. The Insurance Contracts Act (ICA) provides detailed mandatory requirements that protects the policyholder or the insured. The ICA includes strict information requirements on the insurance undertaking, provisions relating to the right of cancellation and restrictions on the undertaking’s right to change the terms of the insurance contract in the period of cover. Moreover, an insurer may not refuse to allow a consumer to take out insurance which it normally provides to the public and the period of insurance may never exceed one year unless there is reason for a longer period of insurance.

Claims regarding marketing of insurance are dealt with by a special court, the Patent and Market Court (Sw. Patent- och marknadsdomstolen). Disputes regarding terms and other disputes regarding insurance are dealt with by a general court without special competence in the field of insurance. Although Swedish judges are generalists they are used to handle complex cases regarding commercial insurance claims.

Yes, the Stockholm Chamber of Commerce (Sw. Stockholms handelskammare) (SCC) is a politically independent and a non-profit organization for arbitration and mediation. The SCC is one of the world’s largest and most recognized dispute resolution institutions and it administrates disputes from more than 40 countries every year. To resolve a dispute at the SCC, the contract must contain a dispute resolution clause referring to the SCC.

Yes, a (re)insurance portfolio transfer is subject to prior approval by the SFSA. The procedure for approval is set out in the Insurance Business Act which implements art 39 of the Solvency II Directive. Prior to the SFSA approval, details of the portfolio transfer are published in the Swedish Official Gazette. Upon the SFSA approval, the portfolio transfer is binding upon insureds, policyholders and beneficiaries.

The Swedish insurance market is highly regulated and from a general point of view, compliance could be a challenge to new market entrants.

Further, competition in the Swedish insurance market is tough. The Swedish insurance industry consist of some 285 insurance companies. The majority of the Swedish insurance companies are small non-life insurance companies, but the market is concentrated into a few large groups. The international presence on the Swedish insurance market has increased in the past ten years. There are now more than 40 foreign insurance companies represented via branches or agencies and in addition, numerous foreign insurance companies market insurance services in Sweden on a freedom of services basis.

The market is being challenged by digital innovation in regard mainly to the conclusion of contracts, but to some extent also in claims handling where some undertakings use artificial intelligence and chatbots to process claims. In addition, many start up insurers and insurance intermediaries provide comparison between policies through scraping insurance coverage details from providers’ websites.

Legislation regarding the conclusion of insurance contracts are mostly referring to physical requirements. Changes and updates have been made both internationally and nationally, but as the market continues to be majorly digitized via online, an app or even through telephone, there is likely more adapting are required.

It is our impression that the SFSA considers digitalization as something basically positive among other things due to that the digitalisation is considered to result in higher competition and to facilitate development of new services. The SFSA is however concerned with the cyber risks associated with digitalisation. Further, from a customer protection perspective, the SFSA has communicated that it sees an increased risk for digital exclusions, i.e. that some customers will not ‘keep up’. The SFSA has underlined that financial institution have a responsibility in the ongoing transition to consider the conditions for all customer groups.

All businesses that handle personal data must comply with Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 (GDPR).

Laws and regulations specific to the financial or insurance industry set out additional rules on the processing of personal data (e.g. medical data, AML-related KYC data), the storage of data and cyber security.

The GDPR provides detailed rules on the sharing of data outside the EEA. Sharing of personal data with entities established in third countries is only permitted under specific conditions and when the data controller has sufficient legal ground for such transfer (e.g. explicit consent, adequacy decision, necessity for the conclusion or performance of a contract in the interest of the data subject).

Life insurers are subject to ESG regulation and oversight through the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (SFDR). In addition, all insurers are subject to ESG regulations through the Commission Delegated Regulation (EU) 2021/1256 of 21 April 2021 which amends the Solvency II Regulation in respect of the integration of sustainability risks in the governance of insurance and reinsurance undertakings.

Although we believe that the big insurance groups in Sweden will maintain their dominance of the Swedish insurance market, the market will see increased competition from new market entrants that can distribute insurance and handle claims more efficiently than the big players and that communicate with customers more easily on the media where the customers are.