Nordic insurer Sampo has submitted an application for a group partial internal model to calculate the solvency capital requirement for its property and casualty operations to the Finnish Financial Supervisory Authority. 

The Helsinki-based insurer currently uses the standard formula at group level, although some of its subsidiaries use internal models for different risks. 

Sampo estimated that the group PIM would have reduced the group SCR by up to up to €300m (£257m) in the first quarter of 2023. 

“The model recognises the risk profile of Sampo’s P&C operations better than the standard formula,” said the group.

The firm expects the application process will be completed during the first half of 2024.

Earlier this year, Sampo announced it would separate one of its subsidiaries, Mandatum, from the group. The demerger was approved at its annual general meeting last month. Once the demerger is completed, expected on 1 October, Sampo expects that its group prudential supervisor under the Solvency II framework will change from the Finnish FSA (Finanssivalvonta) to the Swedish FSA (Finansinspektionen).

It explained that according to Article 247 of the Solvency II Directive, the group prudential supervisor is based on the entity with the largest balance sheet. 

Once the separation with Mandatum is complete, the largest entity within Sampo Group will be Sweden-domiciled If P&C Insurance, the company explained.

In its capacity as a listed company, Sampo will continue to be supervised by the Finnish FSA.

Asked why Sampo decided to submit its PIM application to the Finnish supervisor instead of waiting for the change of prudential regulator, a spokesperson said the application must be sent to the current group supervisor, which is the Finnish FSA.

“As a pure-play P&C insurance group, submitting the group partial internal model application now is a natural step for us and in line with Sampo’s current P&C insurance strategy,” said the spokesperson.

“It is true that we might need to re-apply with the Swedish supervisory authority after the demerger takes place, assuming that the demerger happens on 1 October 2023 as planned and that the Finnish FSA has not completed the application process by then. However, it does not cost anything extra to keep the process going – it is always possible that there is a delay in the effective date for the demerger due to market conditions, for example.”

The group is made up of Swedish P&C insurer If P&C, Danish non-life insurer Topdanmark, UK general insurer Hastings, Finnish financial services provider Mandatum and the parent company, Sampo plc.