Swedish occupational and private pensions provider Skandia Liv has been given a warning and a SEK35m (€3.2m) fine from the country’s regulator for not calculating its capital requirements and commitments to customers properly for several years.

In a statement, Finansinspektionen (FI) said: “This has meant that the protection of the customers and the company’s solvency situation could not be assessed in a fair way.”

Skandia has responded by saying it took the criticism very seriously but that customers were not exposed to risk.

The Swedish regulator said it had investigated whether Skandia Liv complied with the rules for calculating its commitments to policyholders – the technical provisions – and the capital the company had to set aside to be able to manage the risks in its operations.

The investigation, which covered the period Q4 2016 to Q3 2019,  also included the documentation the company was obliged to prepare when calculating commitments, FI said.

“For several years, Skandia Liv has used an inaccurate assumption of the risk of premature termination of insurance policies, so-called lapse,” it said.

As a result of this, the firm had not correctly and realistically calculated both its commitments and the capital set aside for these commitments, thereby impeding a fair assessment of the protection for customers and the company’s solvency, FI said.

“The documentation for the calculation of commitments also demonstrated deficiencies that further impeded such an assessment,” it said.

“Skandia Liv’s failure over a long period of time to correctly apply the rules is serious,” it said, but added that the company had taken steps to rectify the deficiencies.

Therefore, the regulator said, it has decided to give the firm a warning and an administrative fine of SEK35m.

Skandia cheif executive officer Frans Lindelöw said his firm had addressed the Swedish FSA’s criticism and took it very seriously.

“It is important to point out that customers have always been safe and not exposed to any risk,” he said, adding that Skandia was a financially strong and well-managed company that lived up to its future commitments to its customers.

Skandia said it had taken on board FI’s comments on the interpretation of the regulations, and that during the fourth quarter of 2019, it had implemented changes in the calculation of technical provisions and capital requirements related to cancellations.

Overall, these changes had no significant impact on Skandia Liv’s capital strength, the company said, adding that it was a stable and secure company with a capital ratio of 465% at the end of 2019, giving it almost five times the regulatory capital required.