Looking to the future

Sweden's life insurance companies and occupational pension plans will radically change the way they discount their liabilities and stress test their portfolios under new rules being drafted by the country's top financial regulator. The so-called 'traffic light' stress test will subject companies' portfolios to hypothetical market shocks across different asset classes as a way for the Swedish regulator to identify institutions that have potentially weak solvency positions. Christopher Jeffery speaks to the architect behind the reforms, Finansinspektionen director-general Ingrid Bonde

Q. Swedish insurance and occupational pension fund regulations are 20 years old. Why has the Finansinspektionen decided that now is the right time to change the way liabilities are discounted to a yield curve approach? And why introduce the 'traffic light' stress test at the same time?

A. The timing for developing a new supervisory framework was triggered by two things: first, when I came to office two and a half years ago, it was a very difficult period for life insurance companies in Sweden