Sweden must change its approach to pension regulation and place insurers offering occupational pensions on equal footing with traditional life insurers, the IMF has urged.

The current two-track approach – whereby the life insurance sector was regulated according to Solvency II, but occupational pension provision was exempt from the European Directive – needs to be resolved, the organisation said.

The recommendations were contained within the IMF’s latest Financial System Stability Assessment for Sweden, which noted that the transposition of Solvency II had led to higher overall standards of regulation but was not being fully applied.

“Solvency II has brought improvements in regulatory reporting and group supervision, as well as higher overall solvency coverage,” the organisation said, while noting the requirements only fully applied to around 44% of the insurance market, which manages assets in excess of the country’s GDP.

It concluded: “The [IMF] mission recommends that the authorities resolve as soon as possible the uncertainties over the approach to regulation to be taken following the end of the transitional period in 2019, and that whatever regime they choose for after 2019, they ensure the same level of protection to occupational pensions as to life insurance.”

The recommendations evoke previous and persistent calls from the European insurance industry that pension providers be put on the same footing as them by introducing capital requirements in the most recent revision of the IORP Directive.

Swedish occupational pension providers have previously asked their government to continue its Solvency II exemption beyond 2019 by designing a bespoke framework for the sector.

Earlier this year, the country’s four largest pension providers said the tailor-made approach could potentially formalise the traffic-light system employed by Sweden’s regulator, Finansinspektionen, which includes stress testing for equity, credit, interest rate, real estate and currency risks.

At the time, Daniel Burr, Solvency II lead at signatory Folksam, said the proposals to the government were meant to signal the industry’s willingness to accept risk-based capital requirements, while simplifying the model used under Solvency II.