Sweden: Insurance Legislative Update, June 2004

Last Updated: 16 June 2004
Article by Peter Kullgren

The Swedish Insurance Contract Act

The Swedish Insurance Contract Act dates back to 1927 and is in many respects not adapted to the current conditions of the insurance market. The applicability of the act is also limited and has been partly overtaken by separate legislative solutions for the most urgent demands, such as the Consumer Insurance Contract Act and various regulations regarding items such as third-party motor insurance.

In May this year the government presented a bill proposing a new Insurance Contract Act. The new legislation is expected to enter into force on January 1, 2006. This new act will replace both the Insurance Contract Act and the Consumer Insurance Contract Act. It will cover almost all kind of private insurance policies. The new act will not only be relevant for individual consumer insurance, personal insurance and company insurance. Different types of group insurance policies (group life- and non-life insurance and collective bargain based insurance) will also be covered by the new legislation.

According to the proposal, an insurer shall be obliged to issue an insurance policy if such a policy normally is provided to the public by the insurer, unless it exist special circumstances, i.e. the policyholder will have a right to take out an insurance policy if the insurer can not plead special circumstances. The rule applies not only to property consumer insurance, but also to personal insurance of individual character, such as life insurance, accident and health insurance.

An insurance company must provide the policyholder with comparatively extensive information about the policy. Certain information must be given before the insurance agreement is entered into and certain information during the policy period.

Financial Advisory Service

On July 1 2004 a new act on financial advice to consumers will enter into force. The new act will be mandatory in favour of the consumer. The legislation will be applicable to so called investment advice, i.e. advice regarding investment of consumer assets in different kind of financial instruments, for example equity, mutual funds and bonds. Advice regarding life insurance policies will also be covered by the new legislation.

The new legislation require that the adviser shall be competent. The advice and other circumstances shall be documented. Further, the business shall be conducted at a certain professional level.

Insurance intermediation

The Swedish government recently presented a memorandum proposing a new act for insurance mediation. The proposal will implement the Directive of the European Parliament and Council on insurance mediation (2002/92/EC). The memorandum also considers a proposal by a governmental committee in 1997 suggesting a new insurance brokerage act.

The new act will establish a system of licence and registration for all insurance intermediaries. An insurance intermediary shall possess appropriate knowledge and ability, be of good repute and have a professional indemnity insurance.

Special rules are suggested for so called linked intermediaries. A linked intermediary is a legal or natural person who has an appointment with one or more insurer to mediate insurance products and where the insurer is responsible for purely economic losses that customers may suffer. A linked intermediary need no licence to conduct business. The insurer is responsible for the intermediary and shall notify the person for registration.

On the basis of their registration in the home state, the insurance intermediary will be able to do business in other member states by way of the freedom to provide services or by establishing a branch.

Furthermore, the disclosure requirement for insurance intermediaries is extended. For example, the customer shall be informed of the price for the intermediation services. Advice shall be adjusted to the individual customer and the intermediary shall suggest a suitable solution. Excluded from the new act are several situations where the consumer protection is deemed not to be so important, for example where an insurance policy is linked to a certain product (travel services or goods).

The new act is proposed to come into force on 1 April 2005.

The Insurance Business Act

New Solvency System

A government committee presented in September 2003 a report proposing a new Swedish solvency system for insurance companies.

The changes proposed to the Swedish Insurance Business Act aim to strengthen policyholder protection by increasing transparency and enhancing incentives for insurance undertakings to identify, estimate and mitigate their risks. Policyholder protection will be augmented by regulations, in order to ensure that the risks involved in insurance undertakings are more clearly reflected in the demands made of these enterprises. The disclosure of a realistic financial position will also improve the platform for supervision and enhance market discipline.

The proposal conforms to international developments in the field, most importantly the ongoing Solvency 2 project (a corresponding reform of regulation in the European Union). Changes are also required in the regulation of undertakings at a national level and these are also being made - in parallel with the Solvency 2 project - in other EU member states. The proposal is compatible with the main principles of the Solvency 2 project as well as current EU directives, and should be regarded as a natural transition from the existing regulation toward the implementation of the new EU directives in Sweden.

The core of the proposal consists of three independent components which must be considered together:

  • realistic valuation of insurance liabilities (technical provisions);
  • amended asset restrictions and valuation of assets covering the technical provisions; and
  • assessment of risk expressed as a safety margin.

The report is expected to lead to changes of the relevant legislation during 2006.

New Insurance Business Act

Furthermore, the government appointed a committee during 2003 to review some of the most important rules in the existing Insurance Business Act. The committee shall propose a new insurance business act. The guiding principles for the committee are the following:

  • The new act shall exclude or minimize any conflict of interest between shareholders and life policyholders.
  • The new act shall contain corporate governance rules that aim to reduce the risk for conflict of interest.

The report shall also contain a proposal for implementation of the EU-Directive regarding institutions for occupational retirements provision.

The committee is to present its first report in September 2004 and its final report in August 2005.

Strengthen the Rights of Policyholders

In March 2004 the government presented a bill proposing changes in the Insurance Business Act. Even these changes aim to strengthen the rights of policyholders in life insurance companies. The bill is a result of several events that have occurred on the Swedish insurance market during the last year. Conflict of interest actions taken by several companies in the insurance sector have started a public discussion regarding the situation of policyholder rights in life insurance companies.

The core of the proposal consists of different components:

  • The independence of the board of directors in life insurance companies shall be strengthen, disqualification rules shall be wider and the policyholders role within the companies shall be clarified.
  • The life insurance companies shall be obliged to issue internal guidelines regarding conflict of interest, the investment guidelines shall cover all assets and the possibilities for SFSA to issue different kind of sanctions shall be increased.
  • The new act regarding financial advice to consumer shall also cover life insurance products and the National Board of Consumer Complaints shall in the future deal with life insurance cases.

The memorandum will lead to changes of the relevant legislation as of 1 July 2004.

Transfer of Insurance policy

In June 2004 the government presented a memorandum proposing a right for policyholders to transfer its pension savings from one insurance policy to another insurance policy or to an individual pension savings account. The new rule is proposed to be applicable to new policies and policies that have been renewed after the new rule have come into force.


Deduction of premiums

In September 2003 the European Court of Justice (ECJ) delivered a preliminary ruling regarding the Swedish tax rules relating to insurance contracts, which distinguish between pension insurance and endowment insurance and apply a different tax regime to each.

The ECJ stated that the provisions on tax deductions for premiums paid under an occupational pension policy, which require the insurance company to be established in Sweden, are not compatible with the rules on freedom to provide services within the European Union (Article 49 of the EC Treaty). The ECJ found that the Swedish tax regime may have had a deterrent effect on Swedish employers that want to obtain occupational pension insurance outside of Sweden, as well as on insurance companies that want to offer their occupational insurance policies in Sweden. The ECJ thus concluded that the provisions in the Income Tax Act on tax deductions for premiums paid under a pension policy are not compatible with the rules on freedom to provide services within the European Union.

The Swedish Supreme Administrative Court has come to the same result as the European Court of Justice regarding the possibility of tax deduction for premiums paid by an employer under a policy issued by an insurance company established in another EU member state.

The immediate consequence of the rulings is that an insurance policy issued by an insurance company established in another EU member state, or in a country which has adopted the EEA Agreement, may not be treated differently from a policy taken out in Sweden. Premiums paid by an employer under such a policy are therefore deductible, under the same conditions. The ruling also implies that the corresponding provisions for individuals conflict with the EC Treaty on the same grounds.

Prohibition to reduce payments

In June 2004 the government presented a memorandum proposing important changes of the tax legislation. The Swedish tax legislation regarding pension insurance has a prohibition for insurer to reduce payments from a pension insurance policy during the first five years of the payment period. Historically, the legislation has been interpreted in a way that an insurer is prohibited to reduce the amount guaranteed, but not the amount that corresponds to the policyholders’ surplus. This means that Swedish life insurers historically had the possibility to re-allocate any amount from the policyholders’ surplus. This procedure have been recommended (and enforced) by the SFSA.

To be able to conduct their business in accordance with the future tax legislation and the Insurance Business Act the insurers must change their products or their procedures regarding payments. We may see products where payments during the fist five years will be lower than before or where an insurer guarantees the surplus as conditional surplus (the policyholder will carry the financial risk).

The proposal is expected to lead to changes of relevant legislation on 1 January 2005 and be applicable to insurance policies that are issued after that date and policies with payments starting after 31 December 2006.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions