Swedish municipalities are increasingly looking to form captive insurers. Some of the larger municipalities have established, or are considering establishing, their own captives. Smaller municipalities are joining together and taking the mutual captive route.
The trend is the result of recent severe premium increases that have reflected the worsening claims results in this sector. Says Hans Brandt of SWERMA: ‘The municipalities now realise that the only way that they can keep the risk costs under control is to work intensively with risk management and combine this work with the formation of a captive to get better control.’
The move will hit those underwriters which are currently active in this sector. It comes at a time when many insurers and insureds are still reeling from the introduction of Sweden's first ever insurance premium tax on 1 July. The tax of 32% affects motor liability premiums. The income generated will finance the expenses associated with motor accidents, such as hospital costs, which are currently borne by society.