# **4 INSURANCE PROVIDERS AND INSURANCE PRODUCTS**<sup>19</sup>

## **_4.1 Introduction_**

There are two categories of providers of annuity products in Sweden: Private insurance companies and mutual benefit societies, which provide annuity products for group occupational and individual accumulation schemes, and the PPM, which is the monopoly provider of annuity products for the financial pillar of the mandatory pension system. This chapter surveys the suppliers of retirement insurance products and presents and discusses the products they provide.

## **_4.2 Overview of Providers of Private Insurance Products_**

At year’s end 2007, there were 42 life insurance companies operating in Sweden with Swedish authorization. In addition, a small number of life insurers and IORPs (institutions for occupational retirement provision) from other EU member countries have operations in Sweden through branch offices. Despite this relatively large number of companies, the bulk of business is concentrated in only seven companies. These seven major companies account for over 90 percent of individual premium payments and hold 97 percent of the total assets of life insurance companies (Table 8). The same seven companies are the major providers of both individual voluntary insurance and occupational group schemes. It is noteworthy that three of the seven companies are owned by three of the largest banks in Sweden - SEB, Handelsbanken and Swedbank.

To complete the picture of insurance provision in Sweden, three more companies should be included. The first is Alecta, the life insurance company that (together with Collectum) administers the ITP contractual plan, but which does not sell individual voluntary insurance. The second is the credit-risk insurer, FPG, which insures pension liabilities of companies retaining the premium payments of employees covered under various plans (book reserves). The third is SPV, which manages contributory schemes for civil servants and other employees of the Swedish state. With these additions, the market value of total assets equaled 80 percent of GDP, while total premium payments amounted to 6.8 percent of GDP in 2006 (Table 8).

Table 9 provides an overview of key financial data for Swedish life insurance companies. Among other things it becomes clear that the sum of premiums, investment returns and the change in the market value of assets was close to twice the amount needed to cover benefit payments and technical reserves/insurance liabilities, that is, to fulfill what are called guaranteed commitments. Sweden’s insurance companies offer what is called traditional insurance, which combines a contractual guarantee with a bonus based on the company’s investment surplus – above what is required to secure the guarantee. The guarantee is presented and analyzed in detail in Section 5 below. In 2006, the operating surplus for all companies was 131 billion kronor for the year 2006. This constitutes an uncommitted surplus, some of which can be distributed to the insured sometime in the future, as a bonus in traditional insurance, to be elaborated on below.

> 19 I am grateful to Björn Palmgren, from the Swedish Financial Supervisory Authority, for reading and providing comments on Sections 4 and 5.

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