The Majority of Persons Insured Under Earnings-related Pension Acts are Insured by a Pension Insurance Company

In general, pension insurance companies handle the earnings-related pension provision of private-sector employees and the self-employed.

Persons insured by pension insurance companies form the majority of all persons insured under the earnings-related pension acts. At the end of 2013, pension insurance companies handled a total of 1.8 million persons insured under the Employees Pensions Act and the Self-Employed Persons’ Pensions Act and approximately one million pensioners. The pension insurance companies handled approximately 69 per cent of all persons insured under the earnings-related pension acts. Of all recipients of earnings-related pension benefits, approximately 52 per cent received their benefits from a pension insurance company.

In the 2000s, the number of persons insured by pension insurance companies has increased by an ample 40 per cent.

Pension insurance companies

A pension insurance company is a strictly regulated company form

The acts applied to pension insurance companies are the Act on Pension Insurance Companies (354/1997) and the Insurance Companies Act (521/2008).

In Finland, a pension insurance company can be founded by one or several natural or legal persons (e.g. a company or corporation). At least half of the founders have to be resident (for legal persons, domiciled) in the European Economic Area, unless the Ministry of Social Affairs and Health grants an exemption from this.

Foreign pension insurance companies may not directly engage in statutory pension insurance in Finland, but a foreign corporation or natural person may establish a pension insurance company in Finland. The company shall be subject to the same restrictions regarding line of industry and concessions as a pension insurance company established by Finns. So far, no foreign insurance company is engaging in the earnings-related pension insurance business in Finland.

A pension insurance company may be a limited liability insurance company (incl. a public one) or a mutual insurance company. The owners of a mutual insurance company are the policyholders, i.e. the employers and the insured, i.e. the employees, as well as any holders of guarantee shares.

The minimum basic capital required for a pension insurance company is EUR 5 million.

Furthermore, a pension insurance company handling statutory earnings-related pension insurance is required to have a concession granted by the Council of State. The Council of State may include conditions in its concession, necessary to safeguard the interests of the policyholders and the insured, to ensure the stable functioning of the company and to promote the healthy development of the earnings-related pension insurance business. Moreover, a pension insurance company’s articles of association and any changes to them must be confirmed by the Insurance Supervisory Authority.

Earnings-related pension insurance has to be kept separate from other business operations

A pension insurance company may not handle any other type of insurance activities than insurance under the Employee’s Pensions Act and the Self-Employed Persons’ Act and related reinsurance.

The EU Life Insurance Directive is not applied to Finnish pension insurance companies, which is why statutory earnings-related pension insurance has to be kept legally separate from the group’s other insurance activities.

The assets of a pension insurance company have to be kept separate from the assets of companies that belong to the same group as the pension insurance company. The annual accounts of the pension insurance company may not be included in the consolidated accounts of another company.

Moreover, the financial management and payments traffic of the pension insurance company must be arranged so that assets are not used for arranging the financial management or payments traffic of another company which belongs to the same group as the pension insurance company.

Administration of pension insurance company

The administrative structure of the companies follows the normal model for companies. At the annual general meeting, power of decision is exercised by the company’s shareholders in accordance with the Insurance Companies Act. The Supervisory Board is elected at the general meeting, and the obligations of the Supervisory Board are determined according to the legislation on limited companies.

The Supervisory Board nominates the members of the Board of Directors. The Supervisory Board and the Board of Directors have to be representatives for the policyholders and the insured chosen from the persons suggested by the central labour market organisations representing the employers and the employees. There must be an equal number of such representatives for the employees and for the employers, and their total number has to be at least half of the total number of members in the Supervisory Board and Board of Directors, respectively.

The pension insurance company must have a separate nominating committee, half of which consists of persons suggested by representatives of the policyholders and half of which by representatives of the insured. The nominating committee makes proposals concerning the remuneration and nomination of the members of the Supervisory Board to the general meeting, and proposals concerning the remuneration and nomination of the members of the Board of Directors to the Supervisory Board.

Following normal practices in limited companies, the Board of Directors elects the managing director and supervises the managing director’s activities. The managing director of a pension insurance company may not function as the managing director of a credit institution or investment service company in the same company group or financial and insurance conglomerate as the insurance company. Nor may the managing director be a member of the Supervisory Board or of the Board of Directors of the company.