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Insurance Legislation

There are two different legislative blocks that form the foundation for all private insurance activity in Sweden. The Insurance Business Act establishes regulations for insurance operations and the Insurance Contracts Act regulates the relationship between the insurer and the insured.

The Insurance Business Act

The Insurance Business Act contains regulations for the establishment of swedish insurance companies, as well as rules pertaining to their operations and their overall supervision. In order to establish an insurance company or expand a company's product portfolio, an authorisation is required. Such authorizations are, in the normal case, issued by the Financial Supervisory Authority. An application is granted if the insurance company is deemed to be able to satisfy the requirements for insurance operations. The swedish regulations are adapted to EU's insurance directives.

The insurance industry regulations differ for non-life insurance activity and life insurance activity, which in principle shall be conducted in separate companies.

Supervision shall mainly be limited to stability and transparency. The distribution of profit to shareholders (joint stock companies) or guarantors (mutual companies) is permitted even in companies that conduct traditional life assurance operations. The consumers are protected through requirements for good information and a clear division between the capital of the share holders and that of the insured and through a contracted right to surpluses.

The authorisation granted in an insurance company's home country in an EES nation is valid in all EES countries. Foreign Insurers' operatiobs in Sweden are regulated in the Law on Foreign Insurers'.

The Insurance Contracts Act

A new Insurance Contracts Act (FAL), entered into force January 1 2006. It then replaced the 1927 Insurance Contracts Act and the 1980 Consumer Insurance Act. The Act regulates the legal relationship between, on the one side, the insurer and, on the other side, the insured and others covered by the policy.

The law is applicable to consumers’ insurance (such as householder and homeowner insurance, motor insurance and travel insurance), business insurance and insurance of a person (such as life, accident and sickness insurance). It applies to both individual and group insurance and to collectively agreed insurance. In general, the law is mandatory, which means that any insurance clauses less favourable for the consumer than those set forth in the Act will not be applicable. A freedom of contract applies primarily to business insurance.

FAL regulates, i.a.:

  • customer information before the policy is entered into and during the life of the policy

  • the right to obtain insurance coverage

  • when the insured and the insurer may terminate the agreement

  • what limitations the insurer may set up for coverage

  • premium payments

  • settlement

  • the possibilities for the insured to direct the compensation to someone else (beneficiary).

The Motor Insurance Act

Motor third party insurance is mandatory, in accordance with the Motor Insurance Act (TFL), and covers the strict tort liability that a motor vehicle owner has for injuries to other people and damages to their property.