A stable, well-functioning financial market for all
A stable, well-functioning financial market for all
Inter-company transactions in nine life assurance companies
FI has performed a systematic review of inter-company transactions in nine traditional life assurance companies. The purpose of the review is to design a method of supervision and establish good business practice for inter-company transactions.
Good business practice entails that:
- business relations are manifested in written agreements signed by impartial persons authorized to sign for the company.
- comparisons, analyses and decision data are documented and filed.
- pricing is based on market prices or, alternatively, on the cost price derived from a casual connection.
- all agreement terms are taken into account in determining the market price. The auditors appointed by FI have been tasked with monitoring and reporting whether this high standard is adhered to.
It is also reasonable to increase transparency in this area. FI therefore requires the companies to:
- openly report their internal pricing policy.
- disclose information about major inter-company transactions in the annual report.
FI's review covered agreements pertaining to asset management, IT operations, insurance administration, distribution, marketing and groupwide services.
FI has found cause to level criticism on various matters against several of the surveyed life assurance companies. In general, it can be stated that shortcomings exist with regard to operational management and control of inter-company transactions. Virtually all of the companies display shortcomings in their documentation of comparisons, analyses and decision data. Additionally, the following was noted:
- FI assesses that LF Liv, SEB Trygg Liv Gamla and SEB Trygg Liv Nya do not have adequate staffing to perform operational follow-ups of their asset management agreements.
- Folksam Liv does not have any staff employed solely on behalf of the life assurance company.
- Skandia Liv has shortcomings in its management of agreements.
To ensure that good business practice is established quickly, FI will conduct a constructive dialog with industry players on these matters.
Certain initial comparisons can be made following the review performed by FI. These comparisons have led us to direct further questions to:
- KPA Liv about the size of asset management fees.
- SEB Trygg Liv Gamla about the size of the contractual penalty for premature termination of the asset management agreement.
