14 August 2013

Business Insurance: SWERMA calls for Solvency II clarity for Swedish captive insurers

The Swedish Risk Management Association has written to Sweden's financial regulator to ask that its application of Solvency II rules take into account the characteristics of captive insurance companies.

While Solvency II rules are designed to be applied using the “principle of proportionality,” SWERMA has written to the regulator to call for clarity on how captives will be treated in Sweden once the Solvency II rules come into effect taking into account the fact that captives typically only cover risks linked to their parent companies.

Solvency II, a risk-based capital regime for insurance and reinsurance companies in Europe, likely will come into force in 2016.

There is considerable uncertainty over how captive companies' need for special treatment will be incorporated into Swedish law, according to the letter written by Fredrik Finnman, chairman of SWERMA and CEO of Assa Abloy Insurance Ltd., and FERMA board members Annika Forsgren, CEO of Insurance AB Gota Lejon, and Ola Nilsson, CEO of SCA Insurance AB.

The letter points out that there are 48 captives in Sweden, largely owned by exporting companies but also by public-sector entities.

SWERMA said in the letter that a Swedish public enquiry conducted in 2011 on the application of Solvency II rules in the country, was unclear on the issue of regulation of captives.

According to the letter, while the enquiry proposed that there was no need for a special regulation regarding the application of the proportionality principle to captives, it also stated that there were characteristics of captives' operations that could justify the application of the principle.

In the letter, SWERMA said it hoped for greater clarity on how the eventual Solvency II directive would be applied in Sweden and said it looked forward to a continued good dialogue with the regulator, the Stockholm-based Finansinspektionen.

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