The Danish Financial Supervisory Authority has finalised its executive order on life insurance companies’ health and accident (SUL) insurance businesses, with Insurance and Pension Denmark stating that the regulator has been “responsive” to the industry’s views.

The FSA had raised concerns about life insurance companies bundling pension and SUL products together. It noticed that several life insurance companies were giving large discounts on health and accident insurance, so much that they were usually loss-making for the firm, in order to secure company pension contracts.

The regulator believes that such an approach poses “significant risk” to the long-term sustainability of life insurance companies’ business models. It also believes there is a need for a more directive-orientated implementation of Solvency II requirements for internal separate statements for different business areas.

Having published a draft in June this year, I&PD initially blasted the FSA’s plans but is much more content with the final version, which includes several amendments to the original draft. Companies will now be required to divide their businesses even though one product will generally be supplied.

FSA deputy director, Carsten Brogaard, said: “With the executive order, the Danish Financial Supervisory Authority sets new requirements for separate management of the company's SUL business and life business in order to protect the interests of pension savers. In future, companies must have sustainable business models in both business areas, so that each business area rests on its own.”

I&PD said that with the final version, the FSA has met a number of its wishes, including the importance of respecting the board of directors’ responsibility and role for the companies’ business model and some relief when it comes to reporting requirements.

I&PD CEO, Kent Damsgaard, said: “It is important that the SUL regulation does not lead to inappropriate detailed regulation of prices and products.

“Therefore, we note with satisfaction that the Danish FSA states in a consultation memorandum that the companies 'boards of directors are still responsible for the companies' business model. And that the deadline for the companies' reporting to the Danish Financial Supervisory Authority has been increased to 14 weeks, and that companies with limited business scope and risks can apply to refrain from reporting.”

However, he said that it is crucial with models with ‘bundled’ and ‘unbound’ products can exist and compete on equal terms. “Both the companies and our customers have an interest in there being equal and well-functioning competition between the different models. In the future, the Danish Financial Supervisory Authority will be given an important task of ensuring that the requirements are the same when they implement and enforce the executive order,” Damsgaard concluded.

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