Insurance and reinsurance in Sweden: overview

A Q&A guide to insurance and reinsurance in Sweden.

The Q&A gives a high level overview of the market trends and regulatory framework in the insurance and reinsurance market; the regulation of insurance and reinsurance contracts; the corporate structure of insurers and reinsurers; and the regulation of insurers and reinsurers, including regulation of the transfer of risk. It also covers: operating restrictions for insurance and reinsurance entities, including authorisation/licensing requirements; reinsurance monitoring and disclosure requirements; content requirements for policies and implied terms; insurance and reinsurance claims; insolvency of insurance and reinsurance providers; taxation; dispute resolution; and proposals for reform. Finally, it provides websites and brief details for the main insurance/reinsurance trade organisations in Sweden.

To compare answers across multiple jurisdictions visit the Insurance and Reinsurance Country Q&A tool.

This Q&A is part of the global guide to insurance and reinsurance. For a full list of jurisdictional Q&As visit www.practicallaw.com/insurance-guide.

Contents

Market trends and regulatory framework

1. What were the main trends in the insurance and reinsurance markets over the last 12 months?

The Swedish private insurance market has long been characterised by a deep market penetration and market domination by a few large players. The latest available statistics (for the fiscal year 2014) show that total premium income in the non-life sector amounted to SEK70 billion, of which 80% was shared between the four largest non-life insurers (Länsförsäkringar, If Skadeförsäkring, Trygg Hansa and Folksam).

Paid claims in the non-life sector amounted to SEK51 billion.

In the life sector, total premium income amounted to SEK193 billion, of which 60% was shared between the five largest life insurers (Skandia, Folksam, Alecta, AMF and SEB Trygg Liv). Paid pensions and death proceeds amounted to SEK86 billion.

Market penetration has been deep and steady. For example, around 95% of all Swedish households have home insurance, a figure which has been steady since the early 1990s. Growth has mainly come from the life sector, in products such as private pension savings plans, private health insurance and sickness and accident insurance, the latter two having almost doubled in number of issued policies since 2007, and still growing.

Major events that affected claims in 2014 included Sweden's largest forest fire since 1950 and vast flooding due to rain in southern Sweden, which is expected to lead to a tenfold increase in claims costs for flooding damage compared to 2013.

Regarding the regulation of insurers and reinsurers, 2014 was marked by implementation measures of Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II Directive). In December 2014, the European Insurance and Occupational Pensions Authority (EIOPA) presented the results of its stress tests, which showed that the Swedish participants' solvency capital is levelled with or above the Solvency II requirements.

 
2. What is the regulatory framework for insurance/reinsurance activities?

Regulatory framework

The main Swedish insurance laws are the:

  • Insurance Contracts Act (SFS 2005:104).

  • Insurance Business Act (SFS 2010:2043).

The Insurance Contracts Act sets out the fundamental principles of insurance contracts. It is divided into four parts:

  • Part 1 contains provisions on applicability, definitions, and the principle that the provisions of the Act are mandatory for the benefit of the insured, unless otherwise expressly stated in the Act.

  • Part 2 is divided into eight chapters that regulate non-life insurance contracts for consumers (for example, home insurance and travel insurance) and company insurance (that is, all non-life insurances where the policyholder is a company). Part 2 also includes a chapter on third parties' rights, including provisions on direct action against insurers.

  • Part 3 is divided into seven chapters that regulate life insurance contracts for individuals (for example, life and health products).

  • Part 4 is divided into four chapters that regulate group insurance and collective bargaining-based insurance, encompassing both life and non-life products.

Each part regulates most aspects of insurance contracts for each specific type of insurance, such as provisions on:

  • Formation of contract.

  • Insurer's duties to provide information.

  • Policyholder's duties of disclosure.

  • Premium payment.

  • Claims handling.

  • Statute of limitations.

As of January 2015, the time limit to make a claim runs from the claim's triggering event as stated in the policy. In addition, the time limit to make a claim is now ten years.

The Insurance Contracts Act does not apply to contracts for motor vehicle liability insurance and patient insurance, which are regulated by specific legislation. Additionally, the Insurance Contracts Act does not apply to reinsurance contracts, which are not regulated by Swedish law.

The Insurance Business Act regulates the general operations of insurance companies. It consists of 17 chapters that set out the regulatory framework for:

  • Concession and authorisation.

  • Operations in other European Economic Area (EEA) countries.

  • Claims reserves and premium setting.

  • Debt coverage and permitted investments.

  • Capital requirements.

  • Solvency margins.

  • Supervision.

Further rules on the operations of insurance companies are found in the:

  • Insurance Business Ordinance (SFS 2011:257).

  • Regulations issued by the Financial Supervisory Authority (FSA).

The Insurance Mediation Act (SFS 2005:405), the Insurance Mediation Ordinance (SFS 2005:411) and a number of regulations issued by the FSA govern the establishment, operations and supervision of insurance brokers' businesses.

Regulatory bodies

The FSA is responsible for the supervision of insurance business in Sweden.

Insurers and reinsurers domiciled in other EEA countries which carry out insurance operations in Sweden through an established branch, agency or on a freedom of services basis are regulated by the regulatory authority of their respective countries of domicile. The FSA only carries out limited supervision over such insurers/reinsurers (for example, regarding compliance, claims handling and complaints procedures).

Insurers and reinsurers domiciled in countries outside of the EEA must be granted concession by the FSA to carry on insurance operations in Sweden. The FSA only regulates the activities of the Swedish branch or agency of such insurers.

 

Regulation of insurance and reinsurance contracts

3. What is a contract of insurance for the purposes of the law and regulation? How does it differ from a contract of reinsurance?

Contract of insurance

There is no legal definition of insurance contracts. However, there is a basic consensus (based on the writings of legal scholars in the first half of the 20th century) that an insurance contract is a contract between an insurance company and a policyholder under which the insurance company, in return for payment of a premium, undertakes to indemnify the insured on the occurrence of an insured event.

Under the basic principles of Swedish insurance law, the insured event must be uncertain regarding if or when it will occur. In addition, the insurance indemnity must not enrich the insured, although there are numerous exceptions to this principle in practice. Further, the interest insured must be insurable, meaning that illegal interests cannot be insured. For example, business interruption insurance for an illegal gambling den is likely to be deemed uninsurable.

Contract of reinsurance

There is no legal definition of reinsurance contracts. However, there is also a basic consensus that a reinsurance contract is a contract that regulates the reinsurer's liability to reimburse the cedant for an agreed amount of paid indemnities in consideration of premium payment. As reinsurance contracts are not governed by legislation, parties enjoy a greater degree of contractual freedom and the possibility to depart from basic insurance principles.

 
4. Are all contracts of insurance/reinsurance regulated?

All contracts of insurance are regulated. In contrast, there is no specific law that regulates the content of reinsurance contracts. Reinsurance contracts are therefore only governed by the Contracts Act (SFS 1915:218) and other general principles of Swedish contract law.

There are a number of "insurance-like" contracts that are not deemed to be insurance contracts, and therefore fall outside the scope of regulation. Such contracts are often warranties, such as collision damage waivers, motor vehicle damage warranties or consumer goods warranties. Such warranties often entail indemnification if an uncertain and adverse event occurs, which shows that the line between regulated insurance contracts and warranties is often very difficult to draw. Insurance contracts will also fall outside the scope of regulation if they are deemed null as a result of covering non-insurable interests. For example, the Financial Supervisory Authority (FSA) held that contracts insuring against speeding tickets are not insurance contracts.

 

Corporate structure

5. What form of corporate organisation can insurers take?

Insurance companies can be incorporated as (Insurance Business Act):

  • Limited liability companies (owned by shareholders).

  • Mutual insurance companies (owned by policyholders).

  • Insurance associations (which exist for the benefit of their members).

Reinsurance companies can be incorporated either as (Insurance Business Act):

  • Limited liability companies.

  • Mutual companies.

Insurers domiciled in other countries can carry out activities in Sweden as branches or agencies. Insurers domiciled in other EEA countries can also carry out insurance activities in Sweden on a freedom of services basis.

 

Regulation of insurers and reinsurers

6. Are all insurers and reinsurers regulated? Are they all regulated in the same way?

All insurers and reinsurers referred to in the Insurance Business Act are regulated by the Financial Supervisory Authority (FSA). However, the FSA does not regulate insurance activities carried on governed by different legislation (for example, state social insurance schemes).

Insurers and reinsurers domiciled in other EEA countries which carry on insurance activities in Sweden through an established branch, agency or on a freedom of services basis are regulated by the financial supervisory authority of their respective countries of domicile. The FSA only carries out limited supervision over such insurers/reinsurers (for example, regarding compliance, claims handling and complaints procedures).

Insurers and reinsurers domiciled in countries outside of the EEA must be granted concession by the FSA to carry out insurance operations in Sweden. The activities of the Swedish branch or agency of such an insurer will be regulated by the FSA.

 
7. Can insurers and reinsurers carry on non-insurance business? Are there any restrictions on their business activities?

Insurers and reinsurers cannot carry on non-insurance business. Direct life insurance activities cannot be combined with non-life activities other than certain types of accident and health insurances. Conversely, direct non-life activities cannot be combined with direct life activities.

 
8. Are there any statutory limits or other restrictions on, or requirements relating to, the transfer of risk by insurance or reinsurance companies?

There are no restrictions on the transfer of risk, although there are detailed rules on transfers of portfolios. An insurer can only transfer a portfolio to (Insurance Business Act):

  • A Swedish insurer.

  • An insurer authorised in another EEA country.

  • A non-EEA insurer authorised to carry on insurance activities in Sweden.

The transfer must be approved by the Financial Supervisory Authority (FSA). Although a transfer do not require the insured's consent, the FSA will only approve it if the interests of the insured are protected and if the insurer taking over the risk can satisfy certain capital base requirements. A number of detailed formal requirements must also be satisfied. Transfers of reinsurance portfolios require individual consent from the contracting parties.

 

Operating restrictions

Authorisation or licensing

9. Does the entity or person have to be authorised or licensed?

Insurance/reinsurance providers

Except for EEA insurers operating on the basis of authorisations obtained in their country of domicile, all insurers who carry on insurance activities in Sweden must be authorised by the Financial Supervisory Authority (FSA).

To obtain authorisation, a number of requirements must be satisfied:

  • The applicant must be a corporate entity.

  • The applicant's articles of association must comply with the provisions of the Insurance Business Act.

  • The applicant's outlined activities must satisfy all requirements of the Insurance Business Act.

  • For limited companies, all qualified owners must be deemed fit to exercise influence on the management of an insurance company.

  • The proposed board of directors and CEO must be deemed sufficiently qualified and experienced to take part in the management of an insurance company.

  • The applicant cannot have close links that prevent the FSA's effective supervision.

The application must include detailed information about the applicant, its ownership and control, articles of association, organisation description, business plan, capital base, actuary, compliance arrangements, and insurance technical guidelines regarding debt coverage, risk management, money laundering, executive pay, and investment guidelines.

The FSA deals with authorisation applications within five months of receipt. If requested, the FSA may also give an advance ruling on whether or not authorisation can be expected to be granted.

Insurance/reinsurance intermediaries

All individuals or companies who undertake professional insurance mediation activities in Sweden must be authorised by the FSA. Under the Insurance Mediation Act, such activities are defined as:

  • Arranging or advising in respect to insurance contracts.

  • Acting as agent in insurance contracts.

  • Assisting in the administration and performance of insurance contracts.

To obtain authorisation, individuals must:

  • Be over the age of 18.

  • Not be bankrupt or in receivership.

  • Not have a criminal record for financial crime.

  • Have adequate knowledge and competence to carry on insurance mediation activities.

  • Hold adequate liability insurance.

To obtain authorisation, corporations must:

  • Not be in bankruptcy or liquidation.

  • Hold adequate liability insurance.

  • Have management and employees who have adequate knowledge and competence to carry on insurance mediation activities.

The FSA handles applications within 30 days of receipt.

Other providers of insurance/reinsurance-related activities

There are no requirements for other providers of insurance/reinsurance-related services that do not qualify as insurance mediation activities.

 
10. What are the main exemptions or exclusions from authorisation or licensing?

Insurance/reinsurance providers

Insurers and reinsurers domiciled in other EEA countries which carry out insurance operations in Sweden through an established branch, agency or on a freedom of services basis are regulated by the regulatory authority of their respective countries of domicile. They must notify the Financial Supervisory Authority (FSA) of their activities, but do not need authorisation from the FSA.

Insurance/reinsurance intermediaries

There are no authorisation requirements for insurance-related services that do not qualify as insurance mediation activities, that is, any activity that does not involve one of the following:

  • Arranging or advising in respect to insurance contracts.

  • Acting as agent in insurance contracts.

  • Assisting in the administration and performance of insurance contracts.

Other providers of insurance/reinsurance-related activities

See above, Insurance/ reinsurance intermediaries.

 

Restrictions on ownership or control

11. Are there any restrictions on the ownership or control of insurance-related entities?

Insurance/reinsurance providers

See Question 12, Insurance/reinsurance providers.

Insurance/reinsurance intermediaries

There are no restrictions, although the management of intermediaries must be deemed fit and proper to carry out insurance mediation activities by the Financial Supervisory Authority (FSA).

Other providers of insurance/reinsurance-related activities

There are no restrictions on the ownership or control of other providers of insurance/reinsurance-related activities.

 
12. Must owners or controllers be approved by or notified to the relevant authorities before taking, increasing or reducing their control or ownership of the entity?

Insurance/reinsurance providers

The approval of the Financial Supervisory Authority (FSA) is required before either:

  • The acquisition of 10% or more of the share capital or voting rights of an insurance company.

  • Increases of shareholdings in an insurance company leading to the holding of more than 20%, 30% or 50% of the company's share capital or voting rights.

The FSA will approve the acquisition if both:

  • The acquiring party is deemed fit and proper.

  • The acquisition is financially sound.

In its assessment, the FSA takes a number of factors into account, such as the acquirer's reputation, financial strength, and possible connections to money laundering or terrorist financing. The FSA handles applications within 60 to 80 days. The FSA can oppose the acquisition or change in control if there are reasonable grounds to do so.

The FSA's approval is not required for acquisitions or increases in control of non-EEA insurers, although such insurers must notify the FSA of the proposed acquisition or change in control.

Insurance/reinsurance intermediaries

Not applicable. However, changes in management must be notified to, and approved by, the FSA.

Other providers of insurance/reinsurance-related activities

Not applicable.

 

Ongoing requirements for the authorised or licensed entity

13. What are the key ongoing requirements with which the authorised or licensed entity must comply?

Insurance/reinsurance providers

Insurers and reinsurers must operate in accordance with good insurance standards. Insurers must also comply with the requirements set out in the Swedish Insurance Contracts Act. In addition, there are numerous ongoing financial requirements, including:

  • Solvency margins and capital requirements.

  • Maintaining good and prudent asset management.

  • Maintaining adequate reinsurance in relation to risk exposure and financial strength.

Issuance of new shares requires approval from the Financial Supervisory Authority (FSA) in certain circumstances (see Question 12, Insurance/reinsurance providers). Issuance of debt securities requires FSA's approval if the insurer's/reinsurer's total borrowing exceeds 5% of its capital base.

Insurers and reinsurers are not allowed to carry on non-insurance business or transactions (see Question 7).

Insurers and reinsurers are not allowed to carry out transactions or enter into contracts with affiliates within the same company group if the terms of such transactions or contract are not commercially sound.

Insurance/reinsurance intermediaries

Intermediaries must comply with both:

  • Good insurance mediation practices.

  • The provisions of the Insurance Mediation Act.

Other providers of insurance/reinsurance-related activities

Not applicable.

 

Penalties for non-compliance with legal and regulatory requirements

14. What are the possible consequences of an entity failing to comply with applicable legal and regulatory requirements? What recourse do policyholders have if they have done business with a non-approved entity?

Insurance/reinsurance providers

If an insurer or reinsurer fails to comply with the requirements of the Insurance Business Act (for example, insurance technical guidelines, asset management, and capital requirements) the Financial Supervisory Authority (FSA) can:

  • Order the insurer/reinsurer to take corrective actions.

  • Impose limitations on (or prohibit) the disposal of the insurer's/reinsurer's assets in Sweden, in cases of serious violations.

  • Impose fines up to SEK50 million.

  • Revoke the authorisation to carry out insurance business. If the authorisation is revoked, the insurer may also be forced to enter into liquidation.

If an entity carries on insurance business without authorisation, the FSA can order the entity to cease its activities under penalty. If the entity is a limited liability company or an incorporated association, the FSA can also apply for liquidation of the entity.

"Insurance contracts" issued by unauthorised entities are deemed unenforceable, and the "insured" is therefore in theory entitled to recover all sums paid and to compensation for any loss suffered.

Insurance/reinsurance intermediaries

If an insurance intermediary fails to comply with the requirements of the Insurance Mediation Act, the FSA can:

  • Order the intermediary to take corrective actions under penalty.

  • Impose fines up to SEK50 million.

  • Revoke authorisations.

If an insurance intermediary carries out insurance mediation business without authorisation, the FSA can order it to cease such activities under penalty. Customers of an unauthorised insurance intermediary are entitled to damages for any loss suffered.

Other providers of insurance/reinsurance-related activities

Not applicable.

 

Restrictions on persons to whom services can be marketed or sold

15. Are there any restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold?

There are no restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold.

 

Reinsurance monitoring and disclosure requirements

16. To what extent can/must a reinsurance company monitor the claims, settlements and underwriting of the cedant company?

The reinsurer's ability to monitor the claims, settlements and underwriting of the cedant depends on the terms of the reinsurance contract. Most reinsurance contracts entitle the reinsurer to:

  • Audit the cedant's records.

  • Be informed of circumstances that may give rise to losses.

"Follow the settlements" or "follow the fortune" clauses are often found in reinsurance contracts. Reinsurance treaties usually require the reinsured to submit a bordereau outlining the risks accepted and/or reported claims.

 
17. What disclosure/notification obligations does the cedant company have to the reinsurance company?

There are no legal disclosure/notification obligations. However, in practice, reinsurance contracts often contain such obligations, for example in the form of pre-contract disclosure of known material circumstances and underwriting activities, as well as time limits for claims notification.

 

Insurance and reinsurance policies

Content requirements and commonly found clauses

18. What are the main general form and content requirements for insurance policies? What are the most commonly found clauses?

Form and content requirements

The Insurance Contracts Act does not contain mandatory terms that must be included in insurance policies. There are no minimum coverage provisions, except for specific mandatory insurances governed by special legislation such as patient insurance and motor vehicle liability insurance. However, in practice, policies tend to mirror the wording of the Insurance Contracts Act, as the Act will apply instead of contractual provisions that are less favourable to the insured than those of the Act. There are no prohibitions on coverage, although policies cannot cover illegal interests.

Commonly found clauses

Most insurance policies contain the following clauses:

  • Definitions of the insurer, policyholder, insured and beneficiaries.

  • Sums insured.

  • Definition of the insured interest and claims triggers.

  • Exclusions and limitations of coverage, including for gross negligence, increase in risk and breach of safety requirements.

  • Notification requirements and time limits for making a claim.

  • Contractual term.

  • Premium payment provisions.

  • Deductibles.

 
19. Is facultative or treaty reinsurance more common? What are the most commonly found clauses in reinsurance policies?

Facultative/treaty reinsurance

Facultative and treaty reinsurance contracts are both common.

Commonly found clauses

Most reinsurance contracts contain the following types of clauses:

  • Disclosure requirements regarding the cedant's underwriting activities.

  • Rights of the reinsurer to inspect the cedant's records.

  • "Follow the fortune" or "follow the settlement" clauses.

  • Claims co-operation and/or claims control clauses (in facultative reinsurance).

  • Premium levels and premium payment provisions.

  • Choice of law and dispute resolution provisions.

 

Implied terms

20. Are there any terms that are implied by law or regulation (even if not included in the insurance or reinsurance contract)?

The provisions of the Insurance Contracts Act are mandatory for the benefit of the insured unless otherwise expressly stated in the Act. This means that the Insurance Contracts Act will apply if the parties to the insurance contract have not agreed otherwise. The Act will also apply instead of contractual terms that are less favourable to the insured than the provisions of the Act. Policies must therefore be drafted carefully to comply with both the mandatory provisions of the Act and the insurer's underwriting objectives.

The duty of utmost good faith is not codified in Swedish insurance law. However, it is deemed to apply to all insurance contracts. The Insurance Contracts Act contains various provisions that reflect this basic principle, such as provisions requiring the policyholder to disclose information about the risk and any increases in risk to the insurer. In reinsurance contracts, "follow the fortune" clauses may be deemed to imply an obligation for the cedant to consider the interest of the reinsurer when adjusting claims.

 

Customer protections

21. How do customer protections in the general law affect insurance contracts? What customer protections are generally included in insurance policies to supplement this?

General law

The Insurance Contracts Act provides far-reaching customer protection as its provisions are mandatory for the benefit of the insured. Even where the term of an insurance contract does not directly violate the Act, the courts may at their own discretion set aside any contractual provisions that they deem to be manifestly unreasonable under the general Contracts Act, although such decisions are rare in insurance cases.

Insurance policies

As the Insurance Contracts Act is very beneficial to the insured, insurers do not tend to provide additional customer protections in insurance policies. However, in practice, insurers sometimes waive some of their rights or settle the claim in a way that is more beneficial to the insured than that prescribed in the policy.

 

Standard policies or terms

22. What are the main standard policies or terms produced by trade associations or relevant authorities?

Swedish insurers draft their own policies, although these are often relatively similar in practice. The large insurance brokers (March, Willis, AON, and so on) draft standard policies for certain types of insurance that are commonly brokered (for example, property, casualty and financial lines policies).

 

Insurance and reinsurance policy claims

Establishing an insurance claim

23. What must be established to trigger a claim under an insurance policy?

The claim trigger is set out in the policy and varies greatly depending on the type of insurance. Property insurance is usually triggered on an occurrence basis. Liability insurance is often triggered on a claims-made basis.

Under the Insurance Contracts Act, the insured must notify claims to the insurer within the time frame stipulated in the policy. If the insured fails to notify the insurer in time and this causes a loss to the insurer, the insurer can reduce the indemnity accordingly. For company insurance (that is, non-consumer insurance), the insurer can deny a claim if the insured does not make a demand for indemnity within one year from the event that triggered the claim. The insurer always bears the burden of proof for denying claims on the basis of exclusions, including late notice.

 

Third party insurance claims

24. What are the circumstances in which third parties can claim under an insurance policy?

For property insurance, a third party who has a secured interest in the policyholder's insured property (for example, under a ground lease or chattel mortgage) may in some situations be entitled to receive insurance indemnity ahead of the insured.

For liability insurance, a third party can claim directly against the insurer if the insured is under a statutory requirement to hold liability insurance, such as insurance brokers, accountants and real estate agents. The same applies to motor vehicle insurance. In addition, a third party can claim for indemnity directly against a liability insurer if:

  • The insured is in bankruptcy.

  • Public composition has been ordered by the court.

  • The insured is a legal entity that has been dissolved.

 

Time limits

25. Is there a time limit outside of which the insured/reinsured is barred from making a claim?

The insured must bring legal proceedings against the insurer within ten years from the date when the claim was triggered under the policy. However, the insured is always granted six months to commence proceedings from the date of receipt of the insurer's final decision on the claim. If proceedings are not brought within this time frame, the right to indemnity is lost.

In company insurance (where the policyholder is not a consumer), policies can include provisions that entitle the insurer to deny claims if the insured does not present a demand for indemnity within one year from the event that triggered the claim. The insurer can also order the insured to commence proceedings within one year from the insured's receipt of the insurer's final decision on the claim. If proceedings are not brought within this time frame, the right to indemnity is lost.

The time limit for making a reinsurance claim is set out in the reinsurance contract.

 

Enforcement

26. Can the original policyholder or other third party enforce the reinsurance contract against a reinsurer?

Original policyholders or other third parties cannot enforce reinsurance contracts directly against reinsurers, regardless of whether the cedant is insolvent.

 

Remedies

27. What remedies are available for breach of an insurance policy?

Insurer

Where the insured has substantially breached its duties under the insurance policy, the insurer's remedies are the:

  • Cancellation of the policy.

  • Reduction of indemnity (in part or in full).

Insureds' breaches often involve a degree of bad faith, and can include:

  • Lack of full and truthful disclosure of the risk, increases in risk and nature of claims.

  • Non-compliance with safety requirements.

  • Fraudulent, intentional or grossly negligent actions which cause or worsen the loss.

Insured

If the insurer has substantially breached its duties under the insurance policy or the Insurance Contracts Act, the remedies for the insured are the cancellation of the policy and/or damages.

 

Punitive damage claims

28. Are punitive damages insurable? Can punitive damages be reinsured if they are covered by an underlying policy?

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

 

Insolvency of insurance and reinsurance providers

29. What is the regulatory framework for dealing with distressed or insolvent insurance or reinsurance companies, or other persons or entities providing insurance or reinsurance related services? What regulatory and/or other protections exist for policyholders if the insurance company is insolvent?

The regulatory framework for insolvent insurers and reinsurers broadly follows the general rules of Swedish bankruptcy law. Distressed insurers and reinsurers may be forced into compulsory liquidation if their equity is less than half of their share capital. If an insurer or reinsurer enters into bankruptcy, the Financial Supervisory Authority (FSA) must revoke its authorisation and appoint a special receiver to administrate the bankruptcy. Insurers or reinsurers cannot enter into any new insurance contracts if they go into bankruptcy. Life insurance companies in bankruptcy must seek to transfer their risk portfolios to other insurers.

The insured is entitled to terminate an insurance contract immediately if the insurer:

  • Enters into bankruptcy.

  • Cannot be deemed in a position to fulfil its obligations.

In such cases, the insured is also entitled to damages for any loss suffered. However, a claim for damages will be unsecured in the bankruptcy. Any claims for indemnity under an insurance or reinsurance contract will be secured in the bankruptcy.

 
30. Can excess insurance policies "drop down" to provide coverage if the primary insurer goes into insolvency?

A "drop down" is possible if this is agreed by the parties in the excess insurance policy.

 
31. Is a right to set-off mutual debts and credits recognised in an insolvency proceeding involving an insurer or reinsurer?

Set-offs are recognised in regular insolvency proceedings (including those involving an insurer or reinsurer).

 

Taxation of insurance and reinsurance providers

32. What is the tax treatment for insurers, reinsurers, and other persons or entities providing insurance and reinsurance-related services?

Life insurers are partly taxed according to both:

  • Special rules on taxation of return on pension funds.

  • General rules on income tax.

Non-life insurers and reinsurers are taxed as regular limited liability companies, although they are entitled to make deductions for insurance technical deposits. Most insurance products are exempt from insurance premium tax, although premiums received for motor vehicle insurance are taxed. Insurance and reinsurance premiums are not subject to value added tax (VAT).

 

Insurance and reinsurance dispute resolution

33. Are there special procedures or venues for dealing with insurance or reinsurance complaints or disputes?

Most insurers offer internal procedures for the reassessment of claims decisions, although it is not mandatory to do so.

Consumers can refer decisions of insurers to the National Board for Consumer Disputes. There are also special boards that deal with specific types of claims, including the:

  • Board for Personal Insurance.

  • Board for Bodily Injury Liability Insurance.

  • Board for Counsels Expenses.

  • Board for Legal Protection Insurance.

The boards' rulings are not binding, although it is common practice for insurers to follow such rulings.

Disputes are otherwise handled by the courts or arbitral tribunals.

 
34. Are arbitration clauses in insurance and reinsurance agreements enforceable?

Arbitration clauses in insurance and reinsurance agreements are common and enforceable (except for consumer insurance).

 
35. Are choice of forum, venue and applicable law clauses in an insurance or reinsurance contract recognised and enforced?

Choice of forum, venue and applicable law clauses are common and enforceable, although any agreement between a Swedish insurer and a Swedish policyholder not to apply the Insurance Contracts Act is likely to be set aside as unreasonable.

 

Reform

36. What proposals are there for reform of the law, regulation or rules relating to the provision of insurance or reinsurance services?

The main upcoming reform of insurance law is the implementation of Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II Directive), scheduled to take effect on 1 January 2016.

 

Main insurance/reinsurance trade organisations

Insurance Sweden (Svensk försäkring)

Main activities. Insurance Sweden is the industry organisation for insurance companies. About 40 insurance companies are members of Insurance Sweden and account for more than 90% of the Swedish insurance market. Insurance Sweden is a member of the European insurance and reinsurance federation, Insurance Europe, and participates actively in work with Swedish and EU institutions.

W www.svenskforsakring.se



Online resources

Swedish public administration legal information (Lagrummet)

W www.lagrummet.se

Description. Lagrummet.se is the official portal for Swedish public administration legal information. It contains legal information and legislation from the government, the Swedish Parliament, government agencies and the higher courts. It is maintained by the Swedish National Courts Administration.

Swedish Government

W www.government.se/sb/d/3288

Description. The Swedish Government maintains a website with English translations of some (but far from all) Swedish legislative acts and ordinances. The translations are for guidance only.



Contributor profiles

Susanna Norelid, Partner

Advokatfirman NorelidHolm

T +46 733 74 40 52
F +46 8463 04 70
E susanna.norelid@norelidholm.com
W www.norelidholm.com

Professional qualifications. Member of Swedish Bar Association, 1999

Areas of practice. Insurance and reinsurance law; corporate & commercial law; advertising law; dispute resolution (Susanna is ranked among the very top in Sweden in insurance law in publications such as Who Is Who and Legal 500. She is also ranked as "Leading Individual" by Legal 500).

Non-professional qualifications. LLM, University of Lund 1991; Master of International Business Law (LLM), University of London, 1993

Recent transactions

  • Assisting international insurers in all kind of insurance-related matters as well as disputes, both litigations and arbitral proceedings.
  • Acting as an arbitrator.

Languages. Swedish, English

Professional associations/memberships. Swedish Bar Association; International Bar Association; ICC Commission on Financial Services and Insurance; ICC Commission on Marketing and Advertising; Swedish Association for Marketing Law (Board member); Swedish Insurance Association; Swedish-American Chamber of Commerce and IADC (International Association of Defense Counsel).

Publications

  • Product Liability (2014), Thomson Reuters (co-author).
  • Insurance & Reinsurance, Getting The Deal Through.
  • Directors' Liabilities and Indemnification: A Global Guide, Globe Law and Business..

Christer A Holm, Partner

Advokatfirman NorelidHolm

T +46 733 74 40 51
F +46 8 463 04 70
E christer.holm@norelidholm.com
W www.norelidholm.com

Professional qualifications. Member of the Swedish Bar Association, 1984

Areas of practice. Insurance and reinsurance law; corporate and commercial law; real estate; dispute resolution.

Non-professional qualifications. LLM, University of Stockholm, 1979

Recent transactions

  • Assisting mainly insurers in all types of insurance-related matters such as regulatory matters, interpreting and drafting insurance policies, claims handling,
  • Assisting reinsurers regarding all forms of dispute resolution, including litigations and arbitral proceedings.

Languages. Swedish, English

Professional associations/memberships Swedish Bar Association; Swedish Insurance Association; International Bar Association; ICC's Commission on Financial Services and Insurance; Insuralex (Vice-president); Swedish Arbitration Association; American Club of Sweden; The center for American and International Law.

Publications

  • Product Liability (2014), Thomson Reuters (co-author).
  • Insurance & Reinsurance, Getting The Deal Through.

Fredrik Seemann, Associate

Advokatfirman NorelidHolm

T +46 733 74 40 59
F +46- 8 463 04 70
E fredrik.seemann@norelidholm.com
W www.norelidholm.com

Areas of practice. Insurance and reinsurance law, dispute resolution.

Non-professional qualifications. LLM, University of Lund, 2012

Languages. Swedish, English, Portuguese, Spanish

Professional associations/memberships. Member of AIJA (International Association of Young Lawyers).

Publications. Product Liability-Jurisdictional Comparisons (Swedish chapter), European Lawyer Reference, published by Thomson Reuters, first edition 2014.


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