Regulations amending Finansinspektionen’s regulations and general guidelines on insurance business (FFFS 2020:6)

Finansinspektionen’s Regulatory Code
Publisher: Finansinspektionen, Sweden, www.fi.se ISSN 1102-7460 This translation is furnished solely for information purposes. Only the printed version of the regulation in Swedish applies for the application of the law. 1 Regulations amending Finansinspektionen’s regulations and general guidelines (FFFS 2015:8) regarding insurance business; decided on 19 May 2020. Finansinspektionen prescribes1 pursuant to Chapter 7, section 2, first paragraph, points 17 and 18 and second paragraph of the Insurance Business Ordinance (2011:257) that Chapter 4, sections 15 and 23 and Chapter 10, section 4 of Finansinspektionen’s regulations and general guidelines (FFFS 2015:8) regarding insurance business shall have the following wording.
Chapter 4
Section 15 An insurance undertaking, following consent from Finansinspektionen,
may use matching-adjusted risk-free interest term structures for relevant durations when calculating the best estimate of life insurance liabilities, including life annuities and disability annuities deriving from non-life insurance contracts, provided that the following requirements have been met:

1. A portfolio of assets that corresponds to the life insurance liabilities, consists of
   bonds and other assets that have similar cash flow characteristics.
2. The asset portfolio as in point 1 does not change over the life of the life insurance
   liabilities. However, if material changes are made to cash flows, changes may be made to the asset portfolio in order to preserve consistency in cash flows between the asset portfolio and the liabilities.
3. The asset portfolio as in point 1 is managed separately and cannot be used to cover
   losses arising in the other operations of the undertaking.
4. Cash flows for the asset portfolio as in point 1 cannot be changed by the party that
   issued the assets or by another third party, unless the insurance undertaking receives sufficient compensation to attain the same cash flows by reinvesting in assets with equal or better credit quality. The asset portfolio, however, can include assets for which the cash flows are fixed with the exception of an inflation-dependence, assuming that these assets reflect the cash flows that are dependent on inflation of the liabilities.

1 Cf. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), as worded according to Directive 2019'72177 of the European Parliament and of the Council. FFFS 2020:6 Published 25 May 2020

FFFS 2020:6
2
5. The expected cash flow from the asset portfolio as in point 1 fully reflects every
single anticipated cash flow for the liabilities, in the same currency. Risks due to mismatching between the asset portfolio and life insurance liabilities are not material in relation to the inherent risks in the operations in which matching adjustment is used.
6. The insurance contracts that correspond to the life insurance liabilities do not give
rise to future premium payments.
7. The life insurance liabilities only contain the insurance risks longevity risk,
expense risk, revision risk, lapse risk and mortality risk. If the life insurance liabilities contain mortality risk, the value of the best estimate does not increase by more than 5 per cent in the mortality risk stress test as in Article 52 of Commission Delegated Regulation (EU) 2015/35.
8. The insurance contracts that correspond to the life insurance liabilities do not
contain options for the policyholder. However, the contracts may contain a possibility to wholly or partially terminate the policy prematurely if the value of secured assets exceeds the value of the liability at the time the option is exercised.
9. Life insurance liabilities that correspond to an insurance contract are not split into
different parts when the life insurance liabilities are established.
Section 23 An insurance undertaking shall calculate the volatility adjustment as
follows:
VS = the risk-corrected currency spread,
LS = the risk-corrected country spread,
ÖVS = Any increased risk-corrected risk-adjusted currency spread, as below. Here, ÖVS = VS + T, where T = � 𝐿𝐿𝐿𝐿 − 2 ∙ 𝑉𝑉 if 𝐿𝐿𝐿𝐿 − 2 ∙ 𝑉𝑉 > 0 och 𝐿𝐿𝐿𝐿 > 85 basis points 0 otherwise The volatility adjustment VA is then calculated as VA = 65% · ÖVS.
Chapter 10
Section 4 An application for authorisation to acquire shares or participations in an
insurance undertaking shall contain the information set out in Appendix 1a for a natural person or Appendix 1b for a legal person. When the acquirer is a legal person, the application shall also include the information set out in Appendix 1c regarding the acquirer’s members of the board of directors, alternate board members, managing director or deputy managing director _______________ These regulations shall enter into force on 01 June 2020. ERIK THEDÉEN William Svärd