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.
In order for insurance undertakings to fulfil their commitments, they must have sufficient capital and manage their risks and conflicts of interest. FI's review shows that the insurance undertakings are generally well-capitalised and non-life insurance undertakings have demonstrated solid profitability for a number of years. Regulatory amendments and product adaptation have enabled the life insurance undertakings to maintain good solvency despite declining market interest rates.
How the life insurance undertakings in particular manage the risks posed by low interest rates has, in the past few years, been the single most important matter in FI's insurance supervision. The low-rate environment remains in focus in 2015 too. FI sees risks in both the short and long term. The rules regarding the discount rate curve may lead to business models that are unsustainable in the long term potentially being concealed for a long time. This can also lead the undertakings to invest more in risky assets in the hope of boosting return.
A key question in FI's supervision is the insurance undertakings' internal governance and control, and how owners and management deal with conflicts of interest. FI sees that outsourcing operations may present conflicts of interest between the willingness of the management of the undertakings to enhance the efficiency of the operations, and the interests of policyholders. FI's point of departure is that an undertaking shall meet the internal governance and control requirements, irrespective of whether the operations are conducted internally or by a service provider. A relevant question pertains to whether the operations of selection centres should be considered outsourced operations, and what control an insurance undertaking should have of the selection centre's operations.