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How the decennial insurance sector in Sweden became the silent most profitable industry in Sweden

22 April 2013
In Sweden, the decennial insurance is quite popular within the building industry because by law all property builders and owner must take one. The nature of the industry has also been set up in such a way that only two big companies dominate the sector. With such monopoly power, profit maximisation and very little leakages make this the most profitable industry in Sweden.
Anyone who builds houses in Sweden is required by law to take a decennial insurance. This means that several billion of Krona has been paid into insurance companies since 2005, when it became compulsory. However, this does not mean that the qualities of houses built have to fall so that the insurance can compensate. Moreover, the insurance company have had a problem with compensation when it comes to claims made.

This is what one of Sweden's largest builders of residential apartments, SABO have been pondering according to this report from Swedish television. The company has tried to get something out of the Insurance Company after having contributed for so many years - for example - "We have paid about Skr20 million a year and have not been able to exploit it at all," said Petter Jurdell, head of property at SABO to Swedish television.

He says they have been paying in decennial insurance but have never been able to be supported in a single claim. "For seventeen years, we have paid for this insurance without being able to use it once."

Similar experiences have also befallen many property owners and encounter difficulties when the seek the help of these insurance companies for support.

Actually two large companies dominate that insurance sector namely, Bostadsgaranti AB and Gar-Bo Insurance Company. According to statistics from the Swedish Financial Supervisory authority, Bostadsgaranti AB made an average profit margin - technical result - of 43 percent in the last ten years.

The other company is even richer. Gar-Bo's profit in recent years, averages 65 percent. Peter Wipp, president of Gar-Bo Insurances Ltd, identify that FSA figures are misleading and not reflect a proper working for a ten-year insurance.

The argument within the Swedish FSA, the media and within the financial analysts' community in Sweden say they have never seen anything like this.

"I can not think of any other business that may have similar margins," says Stefan Olsson, financial analyst at Bank of Åland to Swedish television. "I look at the industries that are represented on the stock exchange and in the universe, I have not seen examples of something similar," he says.
by Scancomark.com Team

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