FI has identified a number of quantitative indicators that point toward factors in the insurance sector that could have an effect on financial stability. These indicators show that there was good resilience in the insurance sector at the end of the year.
FI has observed deficiencies in the insurance undertakings' practical management of surplus and in their internal guidelines for and information to their customers about their surplus management.
Finansinspektionen is monitoring the developments following the EU referendum in the UK. We are continuing to maintain a dialogue with the Ministry of Finance, the Riksbank and the Swedish National Debt Office and keep close contact with the Swedish banks. FI always has contingency plans in place to take measures that will contribute to financial stability.
The objective of Finansinspektionen's supervision of insurance undertakings is to monitor their ability to fulfil their commitments to customers, and to monitor that customers receive comprehensible and accurate information. This report focuses on the first of the above-mentioned primary objectives.
The European Insurance and Occupational Pensions Authority, EIOPA, has conducted EU-wide stress tests to assess the resilience of European insurance undertakings to adverse market developments. In the Swedish part of the exercise, ten large insurance groups and insurance companies, who account for more than half of the Swedish insurance market, participated.
Swedish banks are relatively strong, but they continue to be vulnerable to disruptions on the financial markets, and the development within the Euro zone continues to represent a risk to the Swedish financial system.
Many of the development trends in today’s financial markets raise important issues for FI. For consumers, greater mobility and increasingly complex financial products represent not only more opportunities but also higher risks. FI needs to bring attention to these risks and resolve them.
Finansinspektionen finds that guidelines from the European supervisory authorities addressed to competent authorities or financial market participants are equivalent to Swedish general guidelines.
Finansinspektionen’s (FI’s) 2012 risk report 2012 continues to focus on unease on financial markets, where the greatest risk to the Swedish financial system is still a deepened sovereign debt crisis in Europe. Because of low market rates, life insurance undertakings are under pressure, and FI now sees a risk of consumers ending up in a squeeze as the firms review their commitments. This year too, FI views the financial advice market with concern. In this market, consumers are being invited to invest in complex products while advisors receive commissions.
The issues presented in this year’s Supervision Report stem from the work on financial consumer protection, financial stability and the requirements on company owners and management. In addition, the report discusses the increased international work, primarily within the EU.
Sweden has remained relatively stable in a turbulent period but during this time the risk level in the Swedish financial system has also risen. The uncertainty in surrounding markets has meant that banks’ liquidity risks and the impact of low interest rates on life insurance undertakings remain in focus. Finansinspektionen also believes there is a risk that the sale of complex products to consumers will increase.
Finansinspektionen's annual Supervision Report discusses areas in which fundamental issues with regard to supervision and regulatory development have risen to the forefront and in turn have resulted in new lessons and conclusions.
Finansinspektionen believes the risk level in the Swedish financial sector is lower than last year. Both Sweden’s economy and the situation on the financial market have improved. However, the uncertainty present in foreign markets represents a potential threat to Sweden’s development.
FI's annual Supervision Report describes the lessons learned from the financial crisis as well as more general issues regarding consumer protection.
Finansinspektionen is charged with ensuring that the financial system isstable and efficient and that consumer protection is adequate. We carry outthese assignments by conducting supervision of financial companies, whichincludes business intelligence, the granting of licences, preparation of egulations,operational supervision with controls of how companies act andpotential interventions.
The insurance barometer, at a total level, summarises the outcome of the insurance companies’ reporting to Finansinspektionen using the traffic light model and solvency for the last five six-month periods.
We can conclude that several insurance companies (life insurance companies and occupational pension funds) have deficits in their technical provisions and that the primary reason is an underestimation of the policyholders’ life expectancy rates.
The occupational pension funds* predominantly have no large holdings or concentrations of complicated financial instruments.
Our investigation of some 20 insurance companies shows that the companies are managing their register of assets covering technical provisions in a satisfactory manner.
Consumers are often offered product insurance when they purchase electronic products. If the consumer accepts, the insurance agreement is printed out and signed in the store.
We are facing great challenges in the insurance sector. A previously typically national, tightly regulated and protected market has been internationalised and subjected to competition. In addition to this is the EU’s overall ambition to create a genuinely inte-grated and common financial market. The aim is to increase competition and effi-ciency, thereby increasing growth and welfare in Europe. The new regulations for sol-vency calculation, Solvency 2, are an important step along the way. This is going to lead to improved methods for analysis and governance of the companies’ risks.
IT disruptions are increasing at some companies and decreasing at others. On the whole, the number of disruptions remains at a constant, high level.
The four Swedish big banks have managed relatively well so far in the international bank crisis. Financing risks has been the greatest threat to Swedish banks during the autumn's turbulence. Thanks to measures by the Riksbank (Swedish central bank) and the Swedish National Debt Office, these risks have been managed to a great extent until the financing markets begin to function normally again.
The competition on the life insurance market is increasing. The pensions based on collective bargaining constitute an increasing share of the total life insurance market. Changed tax regulations are affecting motives and opportunities to take out insurance or supplement private insurances. Other types of investment are challenging life insurance companies and that creates new insurance products with a limited insurance element. FI has surveyed the procurement of supplementary pensions for salaried employees and analysed risks that procurements can entail for a changing pension market.
Finansinspektionen has reviewed 51 companies that did not report that they are a part of an insurance group. The result was that 47 of these companies were a part of an insurance group and should thereby have reported to FI. These companies have been informed that they are supposed to report for the year 2007.
It is not unusual that as much as one-fourth or more of a final pension is comprised of additional amounts that are based on surpluses. It is therefore significant how the company distributes its surplus to the customers.
Parents who have a seriously ill child are entitled to compensation through the Swedish Social Insurance Administration. Those who choose temporary parental benefits can jeopardise their right to compensation from their child’s sickness and accident insurance.
Finansinspektionen has investigated the covering of technical provisions at ten insurance companies. All of the companies had assets that covered the companies' liabilities for technical provisions for the policyholders, in other words full coverage of technical provisions. The assets were also invested in accordance with legal requirements.
The benefit statements for pension savings have not notably improved since Finansinspektionen’s review in 2006. A standard insurance vocabulary that would improve comprehension of the benefit statement is still lacking and many companies still specify fees that consumers pay for pension savings as a lump sum. In addition, too few pension companies explain in simple terms for their investors that the entire sum of the pension capital is not guaranteed.