The Insurance Business Act comes into force in Sweden on 1 July 2021. This is a remarkable law because it regulates all insurance businesses in the country, providing a system that works to protect the insurance sector in the long run. This article takes a brief look at some of the provisions of the Insurance Business Act.
The Insurance Business Act includes numerous provisions affecting the operation of insurance companies. These provisions apply to both new and old companies. These include provisions governing the licensing of short-term insurers and the authorization of new companies based on prescribed criteria. Furthermore, the provision applies to the regulation of insurance policies. The article includes a discussion of the various sections of the Act and their relevance to insurance activities in Sweden. Finally, a brief note on the licensing requirements is included to touch on the role of the Act in the wider context of regulating professions.
The first section of the Act concerns the licensing requirements for short-term insurers. This is a section that goes into the nitty-gritty of insurance activity in Sweden and deals with the various licensing exams that are required for different classes of insurers. The exam requirements differ between the different classes of short-term insurers and the Act provides a general guideline on the procedure required for each one. While this is a detailed provision, the purpose behind the licensing requirement is to facilitate the process of allowing an insurer to operate in the market. To this end, the Act specifies that no foreign insurers can operate under the same system as Swedish insurers.
Another important provision of the insurance business act deals with the manner in which solicitors may be employed by insurers. The insurance companies have the prerogative to hire and employ solicitors, subject to the submission of written proposals by the solicitors to the insurer. In addition, the insurer may also engage the services of a solicitor who represents it in legal proceedings, subject to the submission of written proposals. There is however, a limitation on the number of solicitors that the insurer may employ and the number of solicitors that it may employ at the same time. There is an exception to the third paragraph of the condition attached to the license of a non-Swedish insurer with respect to the three authorized practitioners – the licensed insolvency practitioner, the licensed insolvency counselor and the certified insolvency practitioner.
The fourth section of the insurance business act has to do with the supervision of activities carried out by the covered entities. This is the section that pertains to the supervision of the activities of the insured and their affiliates. The insurance companies may only appoint one person as the controller of the activities carried out by the insured entities. This person shall be the one who, under the supervision of the Insured Party, performs the functions of overseeing the activities of the insurance companies.
In essence, there are only two parties here: the Insured Party, and the Insured Subject. This means that the supervision lies with the Insured Party, while the subject (the insurer) is under the supervision of the law. Under the law, the Insured Party is under no obligation to compensate the other party for the costs or benefits that he acquired as a result of the risk that the insured had undertaken. Hence, the insured can decide whether or not to enter into a reinsurance contract. But, the Insured Subject cannot ever terminate his contract with the insurer before the completion of the term indicated in the contract.
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