Contributed By Mannheimer Swartling Advokatbyrå AB
The Swedish legal system is a hybrid with similarities to both civil law and common law systems. Although the most fundamental source of law is statutory, Swedish private law relies heavily on case law. However, in the interpretation of statutory law, the courts will generally afford great weight to preparatory works and the intentions of the legislator.
There are several key regulatory acts that apply to insurance and reinsurance undertakings in Sweden. The insurance or reinsurance undertaking itself is regulated under the Insurance Business Act (2010:2043) (the IBA), which to a large extent is an implementation of the Solvency II-directive. Insurance distribution is regulated under the Insurance Distribution Act (2018:1219) (the IDA). Together with a few other acts, the IDA implements the Insurance Distribution Directive (the IDD). Foreign insurance undertakings conducting insurance business in Sweden are primarily governed by The Foreign Insurance Activities Act (1998:293) (the FIAA). Insurance and reinsurance undertakings are also subject to other legislation on, eg, consumer protection, marketing, distant sales contracts as well as data protection.
Insurance contracts and most aspects of the relationship between insurer and insured are governed by the Insurance Contracts Act (2005:104) (the ICA). The ICA does not, however, apply to reinsurance contracts (see 6.6 Consumer Contracts or Reinsurance Contracts).
Insurance and reinsurance undertakings as well as insurance intermediaries are regulated by the Swedish Financial Supervisory Authority (SFSA). The primary aim of the SFSA is to ensure the stability of the financial system and to safeguard and further the development of consumer protection.
The SFSA regulates the insurance sector and issues regulations and general recommendations. Where the regulations are binding, the general recommendations apply on a comply or explain basis, which means that the regulated subjects are expected to follow them or explain any departures from their provisions. The sanctions available to the SFSA include the issuance of remarks, warnings, orders to undertake or refrain from undertaking certain actions and administrative fines. With regard to insurance undertakings, the SFSA may revoke the authorisation to conduct insurance business and wholly or partially restrict the insurance undertaking’s right to dispose of its assets in Sweden and decide on how the insurance business should be conducted. Sweden being part of the European Economic Area (EEA), the SFSA cooperates with the European Insurance and Occupational Pensions Authority (EIOPA).
Under the IBA, which applies to undertakings conducting insurance business, insurance business may not be conducted without authorisation from the SFSA. Doing so may result in sanctions from the SFSA (see 2.1 Regulatory Bodies and Legislative Guidance).
There is no statutory definition of insurance business under Swedish law and the issue of whether an activity constitutes insurance business must be assessed on a case-by-case basis. Criteria for that assessment have developed in preparatory works, legal literature and a limited amount of case law. It is generally accepted that, for a business to constitute an insurance business, it must fulfil the following cumulative criteria:
Moreover, in order for an activity to be regulated as insurance business, an assessment of the following additional factors must lead to the conclusion that the activity should be regulated as such:
There are exceptions from the requirement of seeking authorisation from the SFSA to conduct insurance business. A foreign insurance undertaking within the EEA that is authorised in its home state may generally conduct insurance business in Sweden without being authorised by the SFSA (see 3.1 Overseas-Based Insurers or Reinsurers) by way of passporting its license under the principle of single state authorisation within the EEA.
When an undertaking is authorised to conduct insurance business, it may issue insurance contracts in relation to any type of customer (consumer, SME or corporate), provided that the undertaking is authorised within the relevant classes of insurance. The law does not differentiate between categories of customers in this regard. However, the authorisation is only valid for a specific category of insurance within life or non-life, or in certain exceptional cases a combination of insurance categories within both life and non-life. In addition, an insurance undertaking may only conduct insurance business and operations arising directly therefrom.
An insurance undertaking must comply with comprehensive and strict prudential regulation, including a solvency capital requirement and a minimum capital requirement, which are risk sensitive and, therefore, adapted to the aggregate risk level of the individual insurance undertaking, taking into account for example diversification effects and risk mitigating measures. The prudential regulation also includes a qualitative prudent person principle that the insurance undertaking must comply with in regard to for example its investments, as well as various more specific investment regulations concerning among other things the location of assets, risk diversification, investments in derivatives and unlisted assets.
In addition, under the IBA, insurance undertakings are required to comply with several Swedish general standards and principles, that do not follow from the Solvency II-directive. Many are however overlapping. For example, the insurance undertaking is required to maintain satisfactory financial stability (stabilitetsprincipen), abide by generally accepted insurance business standards (god försäkringsstandard) and provide sufficient information when selling insurance products. Another important limitation for insurers is the limited possibility to take out loans. An insurance undertaking may only assume debt if it serves an intention of increasing the efficiency of the capital management or otherwise is required for the insurance business. The insurance undertaking’s total debt must also be limited in relation to the extent of the business and the size of the capital base. Under special circumstances, the SFSA may grant exceptions from the requirement that the total debt must be limited. However, practical experience suggests that the SFSA rarely does so.
Insurance undertakings are also subject to an array of comprehensive requirements regarding corporate governance and outsourcing as well as fit and proper requirements for management and the individuals responsible for central functions, such as compliance, internal control and risk management. Many of these provisions originate from EU law.
Under Swedish tax law, there is generally no taxation of premiums, with the exception of premiums on motor insurance (trafikförsäkring) and group life insurance. Insurance premiums are also exempt from VAT.
The possibilities of conducting business in Sweden for foreign insurers varies significantly depending on whether the insurer is based within the EEA or not. Pursuant to the FIAA, which implements the EU principle of single-state authorisation, an insurance undertaking based within the EEA may conduct insurance business via secondary establishment in Sweden or by way of cross-border activities. With regard to secondary establishment, the EEA-insurance undertaking may commence its business in Sweden two months after the SFSA has received the notification from the home state authority. With regard to cross-border activities, insurance business may be commenced as soon as the SFSA receives notification from the home state authority. Due notification is necessary for EEA insurance undertakings regardless of whether they will conduct business actively in Sweden or merely passively accept business from Swedish insureds.
In contrast, under the FIAA, a third country insurer may conduct insurance business in Sweden passively by way of so-called reverse solicitation without a license or notification. However, should a third country insurance undertaking wish to undertake any active measures whatsoever on the Swedish market, it may only do so pursuant to specific authorisation from the SFSA and only through of a branch or a general agent (ie, not by way of cross-border services). Insurers wishing to establish a branch office in Sweden must appoint a branch manager to run the branch. It must also, before commencing business in Sweden, register the branch with the Swedish Companies Registration Office (the SCRO). A general agent on the other hand is an individual or an entity whose task is to lead and manage the foreign insurer’s insurance business in Sweden. The foreign insurer cannot be represented by more than one general agent. The general agent has to be resident or have its registered office in Sweden.
Regardless of whether the third-country insurer opts for a general agent or a Swedish branch, it needs authorisation by the SFSA in order to conduct insurance business on the Swedish market. Unless otherwise stated below, the same provisions apply to third country branches and general agents.
As an alternative, third-country insurance undertakings may apply for a specific marketing license, which allows them to market their insurance products on the Swedish market by way of the intermediation of another insurance undertaking that is licensed to conduct insurance business in Sweden. The third-country insurance undertaking must then either be part of the same group of companies as the relevant insurance undertaking that is licensed in Sweden or have entered into a cooperation agreement with that insurance undertaking for the marketing of the third-country insurance undertaking’s insurance products on the Swedish market.
In the case of a no-deal Brexit, UK insurance undertakings will go from being EEA insurance undertakings (benefiting under the principle of single state authorisation) to third-country insurance undertakings. If only authorised in the UK, insurance undertakings wishing to continue conducting business on the Swedish market will need to comply with the Swedish provisions mentioned above that applies to third-country insurance undertakings.
Fronting has, historically, not been considered to be in accordance with generally accepted market practice in Sweden. However, attitudes have slowly been shifting. Today, fronting appears to be generally accepted under Swedish law. The fronting insurer must be directly liable towards the insured in order for the arrangement to constitute insurance. Should the fronting insurance undertaking not assume risk, it may be questioned whether the business is in line with for example the Swedish provisions under which insurance undertakings may not conduct other business than insurance business.
Acquisition of shares in an insurance company that would result in a qualified holding is only permitted subject to authorisation by the SFSA. Under the IBA, a qualified holding is a direct or indirect ownership in a company if the ownership represents more than ten per cent of the value of the company, represents more than 10% of the voting rights of the company, or otherwise facilitates a substantial influence over the management of the company. Authorisation is also required if a qualified holding is increased to 20%, 30% or 50% of the shares or the voting rights in the company, or if the insurance company becomes a subsidiary. Authorisation is only given if the acquiring company or person is deemed suitable to exercise substantial influence over the management of the company and if it can be assumed that the acquisition is financially sound.
An insurance company may wholly or partially transfer a portfolio of insurance policies to a Swedish insurance company or to a foreign insurer that is authorised to conduct insurance business in Sweden or in another country within the EEA. Portfolio transfers are subject to procedural rules and authorisation by the SFSA.
One major ongoing trend with regard to insurance mergers and acquisitions in Sweden is the consolidation of smaller insurance undertakings by way of mainly portfolio transfers to the major Swedish insurance undertakings. The likely reason for this trend appears to be an increased difficulty for some smaller insurance undertakings in conducting cost effective insurance business on the Swedish market under an ever-increasing regulatory burden. The benefits of scale appears to allow larger insurance undertakings a competitive edge enabling them to take over smaller portfolios and integrating them in their existing business.
There has not been an overwhelming amount of actual acquisitions of insurance undertakings recently. However, it would appear that in a low interest environment, many investors are constantly exploring different ways of accessing exposure that is uncorrelated, or less correlated, to the financial markets and the insurance sector appears to be able to provide such exposure, either by way of products such as industry loss warranties, etc, or by way of actual investment in insurance undertakings.
Regulation of insurance distribution in Sweden is based on the IDD. The IDD is implemented through the IDA and through the government’s and the SFSA’s regulations. The IDA has a broad scope and applies to those who give advice regarding insurance, conduct other preparatory work before the conclusion of insurance contracts, those who enter into insurance contracts and those who assist in the administration or performance of an insurance contract.
In some respects, the IDA goes beyond the minimum requirements of the IDD. For instance, Sweden has stricter regulations than what is required by the IDD for occupational pensions that are exposed to market volatility. Some of the regulations regarding insurance-based investment products are applicable also to occupational pensions that are exposed to market volatility.
Insurance distribution may only be conducted pursuant to authorisation by the SFSA. Authorisation may be attained either by independent license from the SFSA to conduct insurance distribution or by becoming tied by way of distribution agreement to one or more insurance undertakings. However, authorisation by way of becoming a tied intermediary is not possible if the products that are to be distributed constitute insurance-based investment products or occupational pensions that are exposed to market volatility. A distributor tied to one or several insurance businesses may also not distribute competing products.
A to-be distributor becomes tied to an insurance business by way of a distribution agreement with the relevant insurance undertaking(s). The distribution agreement must stipulate that the insurance undertaking is liable for any pure economic loss that the distributor is liable for in relation to, eg, customers as a consequence of the distributor’s intentional or negligent breach of its duties under the IDD to for example conduct its insurance distribution in accordance with generally accepted insurance distribution standards. The insurance undertaking must register the distributor with the SCRO before the distributor may commence any distribution. The insurance business must also, eg, make sure that the management of the tied distributor has sufficient knowledge and experience to conduct insurance distribution.
The IDA imposes a number of obligations on insurance distributors. An insurance distributor must, eg, conduct its business in accordance with generally accepted insurance distribution standards, design its systems of remuneration in such a way that it does not conflict with the distributors duty to safeguard its customers’ interests, and disclose information regarding both the insurance distributors’ business and the insurance product it is distributing before the customer enters into the insurance contract.
Before entering into, renewing, or extending an insurance contract, the insured has a duty to upon the insurer’s request disclose such information that may affect the question of whether the insurer will issue the insurance policy. The obligation to provide such information continues throughout the insurance period. The insured must answer questions from the insurer truthfully. With regard to information on matters that obviously affect the risk assessment, a commercial insured must provide that information even without the insurer’s request, and both consumer and commercial insureds must correct any previously provided information should the insured realise that it is incorrect or incomplete. The contract is void if the insured, with regard to its duty to disclose, has acted deceitfully. If the insured has breached its duty to disclose by intent or negligence, insurance compensation may under some circumstances be reduced. Further, under the ICA, a consumer insurance contract may stipulate that the insured must expediently disclose any increase in risk. Failure to do so may result in reduction of the insurance compensation. With regard to commercial contracts, such a duty to disclose an increase in risk exists irrespective of whether it is explicitly stated in the contract.
Before entering into an insurance contract, the insurer has a duty to provide certain information under the ICA and the IDA. The insurer must disclose, eg, information that facilitates the insured’s assessment of whether it needs the insurance product in question. The information should give an overview of the insurance coverage and notable exemptions must be clearly stated. During the insurance period, the insurer must provide the insurance policy’s terms and conditions and other circumstances that are of importance to the insured. If the insurer has failed to emphasise certain terms of a consumer contract, it cannot rely on that term. Such terms include for example terms that constitute an unexpected or material limitation of the insurance coverage. In respect of commercial insurance contracts, the insurer may omit to disclose the information that it must disclose in respect of consumer contracts, if it can be assumed that the insured has no need of the information.
See 6.1 Obligations of the Insured and Insurer.
An intermediary may be involved in the negotiation of the insurance contract on either the insured’s behalf or on the insurers' behalf. The intermediary’s obligations would then stem from the IDA (see 5 Distribution), the contract between the intermediary and the insured/insurer, as well as from general principles of contract law, such as the agent’s duty of loyalty towards its principal. However, regardless of on whose behalf the intermediary is acting, the intermediary always has certain obligations towards the customer of insurance products under the IDA and must adhere to generally accepted insurance distribution standards. Such obligations include, eg, taking account of the interests of the customer, only recommending insurance solutions that are appropriate for the customer, and to provide the customer information regarding the distributed insurance product as well as the intermediary’s business and system for remuneration.
There is no statutory definition of an insurance contract under Swedish law and no explicit legal requirements that must be fulfilled for a contract to constitute an insurance contract. Guidance may possibly be sought in the widely accepted definition of insurance business (see 2.2 The Writing of Insurance and Reinsurance). However, insurance contracts may in theory be entered into by two parties of which neither conducts insurance business.
For something to be insurable, it must constitute a legal interest. Thus, it is not possible to insure, eg, loss of goods during smuggling of said goods or losses due to criminal acts.
If a contract is deemed to constitute an insurance contract, the ICA applies and imposes a number of obligations on both insurer and insured.
The legal requirements for, and distinguishing features of, an insurance contract (see 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract) do not differ depending on whether there are multiple insureds or beneficiaries under the contract. There are, however, certain provisions of the ICA that apply specifically to insurance contracts with multiple insureds or potential beneficiaries, such as provisions on, eg, to whom the insurer may pay insurance compensation and on rights in rem with regard to insurance contracts with multiple insureds.
The contracting parties have greater contractual freedom with regard to commercial contracts than with regard to consumer contracts. The ICA imposes more onerous obligations on the insurer and more lenient obligations on the insured in consumer contracts than commercial contracts with regard to, eg, provision of information by the insurer, the insured’s disclosure of information regarding the insured risk, exclusions and the effects of breaching contractual or legal obligations.
Reinsurance contracts are not governed by the ICA, but by the Contracts Act (CA). This provides the contracting parties with greater contractual freedom, than for contracts of direct insurance, as the compulsory provisions in the ICA do not apply between the parties. However, contractual freedom is not without limit under the CA. Although practical experience suggests that it is not frequently used, the CA contains a provision to the effect that a court may ignore or adjust a clause in a contract if the court finds that the clause is unreasonable with regard to the contract as a whole, circumstances at the time of conclusion of the contract or circumstances that have occurred after that. In practice, English reinsurance case law and practice appears to have significant influence over the construction of reinsurance contracts under Swedish law.
Alternative Risk Transfer (ART) from a Swedish perspective is a collective term encompassing both financial reinsurance and other forms of transfer of risk to the international capital markets, such as industry loss warranties. ART typically serves as an alternative to traditional insurance or reinsurance as a way of transferring risk. Although the Swedish ART market is at the beginning of its development, it appears that ART has developed in areas where traditionally the insurance and reinsurance markets have not responded adequately to customer needs and wishes.
The issue with ART is its regulatory treatment and to what extent it will be effective in terms of meeting the insurance undertaking’s solvency requirements. The Solvency II-regulation is applicable in Sweden and it expressly recognises for example financial reinsurance as a risk mitigating technique and that it serves to provide regulatory credit to the extent that it meets certain criteria set out in the Solvency II-regulation.
ART to other jurisdictions may be treated as reinsurance for Swedish insurers to the extent that the contract fulfils the Solvency II-regulation requirements for recognition as a risk mitigant.
The method for construing contracts under Swedish law is fairly well established in case law. However, as insurance contracts differ in structure and function from many other contracts, some general principles that are used for interpreting contracts may not be applied so easily with regard to insurance contracts. In some respects, the typical conclusion of an insurance contract does not correspond particularly well with the typical conclusion of other contracts. For example, in insurance contracts, it is not clear when the insurer’s obligations under the insurance contracts will occur. In relation to non-life insurance policies, it may be uncertain if the insurer’s obligation under the contract will occur at all. This is also illustrated by the fact that insurance contracts are governed under specific legislation – the ICA – rather than under legislation that applies to contracts in general – the CA.
Although there is a difference in the contractual structure between insurance and other contracts, the way of interpreting them is rather similar. As statutory guidance for the construction of insurance contracts has been lacking, the courts have been clarifying the legal basis for interpreting contracts in case law. As with other contracts, the ultimate source for determining the content of an insurance contract is the common intention of the parties at the time of the conclusion of the contract. However, since insurance contracts typically are standardised contracts based on standard forms that are not subject to much (if any) individual negotiation, the common intention of the parties is often not practically possible to prove. Instead, the typical starting point for construing an insurance contract is the wording of the insurance policy.
The objective meaning of the insurance contract should in turn be understood via the normal meaning of the wording itself. In cases where the wording does not lend the reader a clear meaning, the following aspects are to be taken into consideration to understand its meaning; the systematics of the contract and its other content, the purpose of the contract as a whole and the specific clause(s) under scrutiny, non-mandatory law or professional practice. It should also be considered which interpretation of the contract that gives a fair and reasonable result. Should an assessment of these factors fail to yield a result, more general principles of contract construction should be used, such as the in dubio, contra proferentem rule (oklarhetsregeln), the traditional definition of which is, that a vague or ambiguous clause should be construed against the person who drafted the clause.
When there is a dispute over the meaning of an insurance contract, extraneous evidence is admissible for the construction of the contract. This means that external circumstances may be used for determining the meaning of the contract. For example, prior negotiations or written communication relating to the agreement are perfectly admissible in court.
Warranties are set out in insurance contracts as a way for the insurer to make its promise of cover conditional. In other words, it is a way to limit the risk or burden of the insurer. As the basis for the promise to assume risk relies on complex calculations it is indeed necessary to condition the cover to some extent. This serves to make the insurer’s actuarial assessments more accurate and to enable it to charge the correct premium for each specific risk.
While true warranties are not usually set out in Swedish insurance contracts, other important standard conditions may however be noted in this context. One such condition that is usually regulated in insurance contracts are specific standards (eg, locking the doors of the business, having satisfactory alarm system or that electric installations are done professionally) that the insured must adhere to in order for the insurer to remain fully liable for the insured risk. This type of condition (säkerhetsföreskrifter) is regulated under the ICA. If the insured fails to comply with these standards the insurer is free of liability to the degree such damage would be limited by the insured following the warranty. If these condition(s) are not emphasised to the insured by the insurer, they cannot be used against the insured
Conditions precedent do not have a distinct definition under Swedish insurance contract law. However, there are certain provisions under the ICA under which the insurer may reject a claim regardless of whether it has suffered any prejudice.
For example, there is an obligation to disclose information by the policyholder to the insurer in most insurance contracts. If the policyholder has been fraudulent or deceitful in providing such information, or failing to provide such information, to the insurer, the contract will normally be considered void.
Disputes over coverage are usually often addressed in the general court system. However, arbitration is not uncommon when it comes to disputes in relation to commercial insurance contracts. To the extent that reinsurance disputes lead to formal proceedings, which rarely appears to be the case, practical experience suggests that when it comes to reinsurance disputes, arbitration is the main rule.
The Swedish general courts recognise two types of private law legal actions – claims for specific performance and claims for declaratory judgment. In other words, an insured may for example seek a judgment in which the insurer is obligated to pay a certain sum under an insurance contract, or a judgment declaring an insurer liable to pay insurance compensation, per se.
It is common that parties to a dispute settle their differences in good faith. The Swedish courts explicitly and actively work towards finding an amicable solution between parties at dispute, if possible and appropriate.
An insurance claim will become time-barred under the ICA if the insured has not taken legal action against the insurer within ten years after the event that gave rise to the insured’s right to insurance compensation. However, provided that the insured has reported an insurance claim to the insurer within those ten years, the insured will always have a period of six months to bring legal action against the insurer if the insurer denies insurance compensation. Therefore, if the insurer denies insurance compensation, for example, nine years and eleven months after the event that gave rise to the insured’s right to insurance compensation, the insured will have six months to take legal action against the insurer (rather than only one month).
In commercial insurance contracts, a time limit regarding the reporting of claims may be stipulated in the insurance contract (however, the limit may not be less than one year after the circumstances that gave rise to insurance compensation). Further, the insurer may require, in writing, that the insured must take legal action within a certain time period (not shorter than one year), to bring an end to insurance claims. For insurance contracts that were concluded before 1 January 2015, the limitation period is three years after the insured became aware that the insurance claim could be made, or ten years after the earliest point in time at which the claim could be made, unless the circumstances that gave rise to the claim for insurance compensation occurred after 1 January 2015 (in which case the new, aforementioned, provisions will apply instead).
Disputes between consumers and businesses may be submitted to the National Board for Consumer Disputes (ARN), which is a public authority that functions in a manner somewhat similar to a traditional court. However, ARN only submits non-binding recommendations on how disputes should be resolved. From experience, insurance undertakings often comply with ARN’s recommendations.
If a dispute falls under the Brussels/Lugano Regime, Swedish Courts will resolve disputes over jurisdiction under those rules. There are also other Swedish statutes that explicitly give Swedish Courts' jurisdiction over specific areas. For example, under the FIAA foreign insurance undertakings that conducts insurance business in Sweden must adhere to Swedish law and answer to Swedish courts. If the dispute does not fall under any EU regulation or a convention that Sweden is party to, and there are no other statutes regarding jurisdiction applicable in the specific case, disputes over jurisdiction will be resolved by analogous application of Swedish statutes on jurisdiction. In general, for a Swedish court to have jurisdiction, the dispute must have a connection to Sweden, and the Swedish judicial system must have an interest in resolving the dispute.
For insurance contracts covering risks situated in Sweden, choice of law is restricted by the Rome I regulation. The main rule is that Swedish law applies to the insurance contract. There are, however, notable exceptions to this main rule under the Rome I regulation. Further, parties to an insurance contract covering a large risk generally have full autonomy with regard to the choice of law.
Litigation in Sweden is initiated by submitting an application for a summons with a district court that has jurisdiction over the dispute. If the claimant is represented by a member of the Swedish Bar (advokat), the ethical guidelines of the Swedish Bar Association (Advokatsamfundet), as a main rule, require the legal representative to issue a letter of demand to the opposing party before submitting the application for a summons at the district court (or requesting arbitration under an arbitration clause). The application should contain:
If the application fulfils these requirements and is not obviously unfounded, the district court will issue a writ of summons and serve the respondent the summons, after which preparatory proceedings are initiated and the respondent must submit a reply.
The preparatory proceedings aim at clarifying, eg, the parties’ claims and the circumstances invoked in support thereof, invoked evidence, if further investigation or other measures are necessary before the conclusion of the case and if it is possible for the parties to find an amicable solution to the dispute. The court that handles the dispute is to strive towards an amicable solution between the parties if possible and appropriate. The preparatory proceedings usually include several exchanges of pleas and an oral preparatory hearing. After the preparatory proceedings have been closed, a party may only invoke new circumstances or evidence if the party makes probable that the party has had a valid excuse for not invoking the circumstance or evidence earlier, or if the continuation of the proceedings are not substantially delayed if the invocation is allowed.
As a last step in the proceedings before the judgment, a main oral hearing is normally held in which the parties present their cases and any witnesses are heard. Swedish hearings are characterised by orality, immediateness and concentration. In so far it is possible, a hearing should be conducted without delay. The court must base its judgment on what has been invoked during the main oral hearing. During the hearing, the parties are only allowed to submit or read from written pleas or sources if the court finds that it is suitable for the understanding of a statement or if it is favourable for the proceedings.
District Court judgments can be appealed to a Court of Appeal, whose judgments in turn may be appealed to the Swedish Supreme Court. Leave to appeal is required both in relation to the Courts of Appeal and to the Supreme Court.
Judgments from Swedish courts are automatically enforceable in Sweden. Foreign judgments may as a general rule only be enforced if the judgment falls within the scope of a convention that Sweden is party to or an EU regulation.
If a judgment falls within the scope of a convention that Sweden is party to or an EU regulation, an application may be lodged with a district court to make the judgment enforceable in Sweden. Judgments under the Brussels Regime (under for example regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) are automatically enforceable in Sweden if the court proceedings were initiated on or after 10 January 2015. If the court proceedings were initiated before then, an application must be lodged with a district court to make the foreign judgment enforceable in Sweden.
Arbitration clauses in commercial insurance and reinsurance contracts are enforceable in Sweden. There is case law that suggests that an arbitration clause may be ignored if enforcement of the arbitration clause would lead to unreasonable results due to the balance of power between the parties (judgment by the Swedish supreme court, NJA 1984 s 229). However, in said case, the arbitration clause was deemed valid between the parties despite the insured being a very small business and the insurer being one of the largest insurance companies in Sweden. If at all possible, invalidating an arbitration clause would likely be out of the question unless the balance of powers between the parties is so uneven that it resembles an actual consumer contract rather than a commercial contract.
Arbitration clauses in consumer contracts are not enforceable, save for in a few special circumstances, eg, if the contract is a group insurance contract and the insureds are represented by a group representative.
Sweden is party to the New York Convention. Therefore, arbitral awards rendered in foreign jurisdictions are generally enforceable in Sweden in the same manner as a judgment from a Swedish court, subject to the New York Convention and the Swedish Arbitration Act. To enforce an arbitration award from a foreign jurisdiction in Sweden, an application must be lodged with the Svea Court of Appeal.
Swedish courts have a duty to, where appropriate, strive for an amicable solution to each dispute. If the parties agree, the courts may also initiate mediation between the parties. Mediation is also available through the Stockholm Chamber of Commerce. Further, there is generally not anything preventing parties from agreeing on, and independently appointing a mediator. However, although it is common that insurance disputes are settled in good faith between the parties, practical experience suggests that downright meditation between parties in dispute over for example insurance coverage is rather rare.
The ICA imposes an obligation on insurers to handle insurance claims expediently. The principal rule is that payment of claims should be made at the latest one month after the insured has reported the claim and presented the evidence that may reasonably be required in order to determine the insurer’s liability to pay insurance compensation. If it is obvious that the insured is entitled to at least a certain sum, the insurer must pay that sum immediately. In commercial insurance contracts, insurer and insured may agree to terms that depart from obligations laid down in the ICA regarding late payment of claims.
The insured is entitled to interest on the insurance compensation if the insurer is late with its payment. Under general contract law, the insurer may also become liable to pay damages for losses or damage incurred by the insured due to the insurer’s late payment.
Insurers must adhere to generally accepted insurance standards under the IBA. Improper delay of settling claims may amount to a breach of said standards and could, at least in flagrant cases, result in sanctions from the SFSA.
Recent years have shown a steady rise in growth when it comes to the area of insurtech. As society is becoming more reliant on technology in general, established insurance companies and insurtech start-ups alike are trying to keep up. However, some insurtech start-ups appear to be struggling to do so, especially compared with less regulated markets. There are several possible reasons why this is the case. First, the Swedish insurance market is quite mature, with a few incumbents controlling most of the market. This may impede the growth of young insurtech companies, being dependent on the cooperation of the established players.
In addition, insurance regulation and solvency capital requirements may be overly burdensome for insurtech start-ups, with large operational costs to stay compliant. In some areas of the insurance sector this seems to result in smaller insurance undertakings being consolidated into larger ones. This is not to say that there are not successful insurtech start-ups on the Swedish market that could cope with the challenges. Some such entities appear to profile themselves with, and rely heavily on, the use of artificial intelligence, in order to lower costs of production and improve the customer experience.
As a response to insurtech issues, the Swedish Government tasked the SFSA with mapping innovations and needs of the market, especially in relation to the SFSA’s role as a regulator. This resulted in the SFSA establishing an innovation centre. The centre seeks to provide the possibility of maintaining a dialog with, among others, insurtech companies and will give seminars and organise information gatherings. The SFSA will also participate in external events on innovation. According to the SFSA, these measures will allow it to better follow market developments and for fintech (including insurtech) companies to easier stay compliant with new innovation due to the close dialog with the SFSA.
While cyber risk is not a new occurrence, it is constantly evolving along with the advances in technology. Cyber risks pose problems for insurers and non-insurance companies alike. Insurance Europe recently published a report on insurance fraud. In the report it emphasised the on-going increase in cyber-related insurance fraud. According to Insurance Europe, the increase in cyber-related insurance fraud is intertwined with insurers increased online business. Likewise, as companies in general are conducting more business online rather than in more traditional ways, there are emerging cyber risks in the form of for example various types of fraud or other crime.
In parallel with the advances in technology, there is ongoing progress in medical research, resulting in increased longevity. For the pension system, this may pose a significant emerging risk. This was also recognised by the Swedish parliament in a recent vote for an increased age of retirement.
There is also an emerging risk in recent years relating to the increase of large and complex legislative acts in the insurance segment. For insurance undertakings, this is will result (and already appears to have resulted) in higher operational costs due to the fact that it will require more resources to understand and implement all measures necessary for compliance. While the impact for the insurance sector as a whole is significant, small and medium enterprises appear to be the most vulnerable to this risk. Such smaller actors may not draw on economy of scale in the same way as larger entities may.
Finally, the apparently more frequent occurrence of extreme weather is accompanied with new risks. An example of this was the extreme draught in the summer of 2018 in Sweden. It had a significant impact on farmers, which saw crops perish and were struggling to keep their livestock in good health. Much of this risk may be expected to affect primarily property insurers in the long and short run.
To keep pace with emerging risks, insurers have been establishing new insurance products that will allow for businesses to continue their day-to-day operations despite the various emerging risks.
The Swedish insurance market has seen several important legal developments during recent years. Most of these developments have not originated from the Swedish parliament. Instead, a significant portion of the recent legal developments originates from EU law. In other words, many statues impacting the insurance sector are the implementation of EU law. For example, the Solvency II-directive was implemented in Swedish law in 2016. Two years later, in 2018, the Insurance Distribution Directive was implemented.
In a more recent development, the implementation of the EU directive on the activities and supervision of institutions for occupational retirement provision (IORP II) was, at the time of writing, set to come into force in December 2019. With the introduction of IORP II, there has also been a debate in the Swedish parliament on the possibility for members of a pension scheme to relocate to other insurers. An important upcoming development that likely will impact the Swedish insurance market is the 2020 review of the Solvency II-directive. EIOPA recently launched a public consultation on the matter, setting out to consult the European Commission on technical parts of the 2020 review. According to EIOPA, the review will broadly consist of three parts, long term guarantees, potential new regulatory tools as well as revisions to the existing Solvency II framework.
Alongside the legislative developments, there are other developments worth mentioning in the current context, including recently published advice from the European Banking Authority (EBA) on outsourcing. While it is not directly applicable to insurance undertakings, the SFSA has advised insurance undertakings to use the EBA report as guidance in their outsourcing arrangements.
A market development impacting the insurance sector in recent years is ethical considerations in investments. While such considerations may have been part of various companies’ investment processes earlier, there has been a significant push in this area, especially relating to sustainability.
Moreover, one area that is currently undergoing legislative development is the insurance undertakings’ use of cloud service providers and to what extent this is permissible in light of the comprehensive and detailed requirement on their outsourcing arrangements. Cloud service arrangements are often necessarily based on standard terms and conditions, which may not always allow the insurers’ scope to live up to the stringent requirements applicable to their outsourcing arrangements. To this end EIOPA launched in 2019 a consultation on guidelines on outsourcing to cloud service providers. The guidelines are intended to provide guidance to market participants on how the outsourcing provisions in the Solvency 2-directive, the Solvency 2-regulation and EIOPA's guidelines on system of governance are to be applied with regard to outsourcing to cloud service providers.