February 18, 2013 / 3:36 PM / in 5 years

Sweden to implement core solvency rules for insurers at year-end

STOCKHOLM, Feb 18 (Reuters) - Sweden’s financial watchdog - which has taken a tougher stance on its banks than other regulators - said on Monday it would implement core new European solvency rules for its life insurers by the end of 2013.

The Solvency II regulations aim at better protecting consumers by driving insurers to improve their risk management operations and more closely match capital reserves and risks.

Sweden’s move should help improve insurers planning certainty until the overall Solvency II EU rules are brought into force, which is not expected before Jan. 1, 2016.

Part of the new solvency rules involve a so-called discount rate which is used to set how much money life insurers must hold to cover liabilities to policy holders, and which has been a sticking point in talks among the insurance regulators and politicians shaping the new rules.

Sweden’s Financial Supervisory Authority (FSA) introduced in 2012 a temporary floor on that rate for life insurance firms and pension funds as it waited for Europe’s new Solvency II rules to be finalised, helping them avoid being forced into equity asset sales.

The FSA said on Monday its temporary floor - due to expire on June 15 - would now be extended until the end of the year, after which a new discount rate based on the wider European agreement would come into force.

The EU’s insurance regulator, the European Insurance and Occupational Pensions Authority (EIOPA), is testing the impact of the Solvency II rules on firms offering long-term insurance products, and will report in June.

Sweden’s financial watchdog has already required its banks to hold higher levels of capital than their European rivals. Swedish banks are today some of Europe’s best capitalised. (Reporting by Mia Shanley and Daniel Dickson, additional reporting by Jonathan Gould in Frankfurt; editing by Ron Askew)

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