Swedish insurance barometer shows narrowing of solvency margins

Swedish regulator Finansinspektionen’s latest report into solvency margins of insurers suggests a deterioration occurred during the second half of 2011.

Although Sweden became increasingly thought of as a safehaven during the period as concerns grew around eurozone prospects, this caused an increase in demand for Swedish government bonds. However, relatively strong government finances meant that there was an ongoing reduction in supply of such bonds, causing depressed interest rates into 2012, Finansinspektionen (Swedish Financial Supervisory Authority) writes.

Depressed interest rates are the cause of the deteriorating solvency margins, particularly for life companies. This is because low rates increase their technical liabilities. At the same time the capital buffers held by these companies were hit by a reduction of available fixed income instruments with decent yields, falling equity values, and rising credit risk, Finansinspektionen said.

As a result of the deterioration, the regulator introduced a monthly requirement for reports from insurers during the period.

To read the full report in Swedish click here: [asset_library_tag 5255,Försäkringsbarometern]


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