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AMB Country Risk Report

September 28, 2011

Sweden
Country Risk Tier
CRT-1
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial System Risk. • Sweden is a CRT-1 country with very low levels of risk across all three categories. Sweden’s economy, in part due to its heavy reliance on trade, was hit very hard by the global recession, contracting by 5.3% in 2009. However, its economy was able to rebound, growing by 5.5% in 2010 and by 3.8% in 2011. • A.M. Best considers the majority of countries pictured below to be categorized as CRT-1 and CRT-2. The exceptions are the Eastern European countries of Bosnia and Herzegovina, Belarus, Ukraine, and Poland.

Economic Risk
Moderate Low High

Very Low

Very High

Political Risk
Moderate Low High

Very Low

Very High

Financial System Risk
Moderate Low High

Very Low

Very High

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Copyright © 2011 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.

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911 6.M. have enabled it to become a leading exporter. Real GDP CPI Inflation 6. Best 2 . as well as weak global demand for eurozone exports. • Sweden has recovered well from the recession. Swiss Re and A. iron ore deposits.9 24.3 48.0 4. Trade accounts for more than half of gross domestic product (GDP).0 Source: IMF World Economic Outlook and A. Continued growth of around 3% is expected moving forward. The European Central Bank (ECB) has bought bonds from several at-risk member states in an attempt to contain the region’s sovereign debt crisis. weak global demand for its exports. Western Europe began to recover from the global economic recession.0 % 0. Axco. financial market uncertainty surrounding the sovereign debt issues will likely curb further increases. and hydroelectric power. Some challenges to growth remain. relatively high unemployment.85 9. however.0 Economic Risk: Very Low • Sweden’s natural resources.875 5. growth has remained modest and has faltered since the start of 2011. This slowdown is partially due to the sovereign debt issues that have arisen in the eurozone and the United States. including extensive forests. Vital Statistics 2010 Nominal GDP Population GDP Per Capita Real GDP Growth Inflation Rate Premiums Written (Life) Premiums Written (Non-Life) Premiums Growth (08-09) USD bn mil USD % % USD mil USD mil % Country Risk Tier CRT-1 CRT-1 CRT-1 CRT-1 CRT-1 CRT-1 455.0 -6.940 -10. and heightened uncertainties regarding the eurozone sovereign debt crisis. which have lowered consumer and business confidence.AMB Country Risk Report Sweden Regional Summary: Western Europe • In 2010.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -2.0 -4.M.5 1. including an appreciating currency. • While the ECB has raised interest rates twice in 2011 year-to-date to combat inflation.0 2. Moving forward.8 Regional Comparison Sweden Germany Netherlands Denmark Norway Finland Source: IMF. Best 8. fiscal policy across the eurozone will likely remain tight in order to keep government deficits in check.

000 10 0 Sweden Germany Netherlands Denmark Norway Finland 0 Source: IMF and A. Government Stability Labor Flexibility Source: A.000 40 30.000 70 • The Swedish insurance industry is regulated by the Financial Supervisory Authority (FSA). Fiscal Policy 5 4 3 2 1 0 Legal System Monetary Policy Regional Stability Social Stability Business Environment • After easing monetary policy through 2009.M. the Riksbank (the Swedish Central Bank) has been slowly raising interest rates in 2010 and 2011 in response to the positive economic outlook. by not joining European Exchange Rate Mechanism (ERM II) Sweden has been able to avoid adopting the euro and all Swedish political parties have agreed not to adopt the Euro without a public referendum.M.000 20 10. Best GDPPERCAPCHART Financial System Risk: Very Low 90 80 90. Best Page 3 Millions 50.000 Population 70.000 60 40.000 30 20. 60.000 GDP Per Capita 80.000 USD 50 3 . Liquidity may be a concern moving forward if the eurozone sovereign debt crisis intensifies. • The banking sector has restabilized in the wake of the global financial crisis and the government has ended most of its liquidity support programs.AMB Country Risk Report Sweden Political Risk Summary Score 1 (best) to 5 (worst) Sweden World Average International Transactions Policy Political Risk: Very Low • Sweden is a member of the European Union (EU) however.

Best Country Risk Reports are designed to provide a brief.GUIDE TO BEST’S COUNTRY RISK TIERS A. transparent and effective regulation and reporting standards and sophisticated regulatory body will contribute to a volatile financial system and compromise the ability of an insurer to pay claims. Political risk comprises the stability of the Political Risk government and society. Country Risk Tiers Country Risk Tier CRT-1 CRT-2 CRT-3 CRT-4 CRT-5 Definition Predictable and transparent legal environment. nascent insurance industry. or the prospects for that market. A.M. low human development and social instability. Developing legal environment. the greatest challenge to an insurer’s financial stability. A CRT is not a recommendation to purchase. Along with the risk that the insurance industry’s level of development and public awareness. denoting a stable environment with the least amount of risk. legal and business environment with limited or nonexistent capital markets. sophisticated financial system regulation with deep capital markets. mature insurance industry framework. legal system and business environment with developing capital markets. Measures the degree of social stability including human development and political rights. Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial volatility may erupt due to inadequate reporting standards. stored in a retrieval system or transmitted in any form or by any means. contract or other financial obligation for a specific purpose or purchaser. The Political Risk Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of 1-5 with 1 being the least amount of risk and 5 being the highest amount of risk.M. It is not intended to summarize A. legal system and business infrastructure. 4 . Best defines country risk as the risk that country-specific factors could adversely affect the claims paying ability of an insurer. government finances and international transactions. as well as prospects for growth and stability. Best Company. legal system and business infrastructure. Best Web site at www. explanation of some of the key factors that determine a country’s Country Risk Tier assignment. insurance policy. societal tensions.ambest. Political Risk Summary To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The likelihood that government or bureaucratic inefficiencies. Unpredictable and opaque political. Category of Risk Definition The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an Economic Risk insurer.M.M. partially to fully inadequate regulatory structure.M. Countries are placed into one of five tiers. Policy Monetary Policy Measures the ability of a country to effectively implement monetary policy. the efficiency of the government bureaucracy and the appropriateness and effectiveness of the government’s economic policies. contract or any other financial obligation issued by a government. Predictable and transparent legal environment. Measures the overall quality of the business environment.M. hold or terminate any security. Measures the degree of stability in the region Measures the transparency and level of corruption in the legal system. electronic. high level. Copyright © 2011 by A. weak banking system or asset markets Financial System Risk and/or poor regulatory structure.com and are published in the Rating Actions section of BestWeek®. (3) Moderate. (4) High and (5) Very High. sufficient financial system regulation. developing insurance regulatory structure. Categories of Risk Country Risk Reports provide “scores” for three categories of risk for each country. Measures the flexibility of the labor market. strength and performance. Best’s credit rating methodology that is applied to all insurers. recording or otherwise. Country Risk Tier Disclosure A Country Risk Tier (CRT) is not a credit rating. Inc. photocopying. Best’s assessment of economic risk evaluates the state of the domestic economy. All rights reserved. Financial Strength Ratings are proprietary and may not be reproduced without permission. therefore. and ease of doing business. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating. Fiscal Policy Business Environment Labor Flexibility Government Stability Social Stability Regional Stability Legal System Measures the ability of a country to effectively implement fiscal policy. These “scores” are: (1) Very Low. inadequate legal system or international tensions will cause adverse developments for an insurer. legal and business environment with underdeveloped capital markets. Measures the degree of stability in a government. Country risk is evaluated and factored into all Best’s Credit Ratings. an insurer or other rated issuer. Inc. Country Risk Reports A. Version 070208 Copyright © 2011 by A. (2) Low. Best’s opinion on any particular insurance market. which evaluates the ability and willingness of a government to service its debt obligations.M. ranging from “CRT-1” (Country Risk Tier 1). nor do they address the suitability of any particular policy. mechanical. to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and. rather it represents a component of A. mature insurance industry framework. the effectiveness of international diplomatic relationships. A. No part of this report may be reproduced. Relatively unpredictable and nontransparent political.M.M. Best Company. Category Definition International Transactions Measures the effectiveness of the exchange rate regime and currency management. the reliability and integrity of the legal system and of the business infrastructure. Financial Strength Ratings are distributed via press release and/or the A. including the company’s ability to hire and fire employees.