To complement the ongoing efforts to build the capacity of domestic insurers, the Bank will continue to leverage on strategic initiatives to achieve the desired financial landscape which will also be better able to contribute to the socio-economic objectives of the country, as well as to be better to withstand competitive pressures in the provision of insurance products and services. Consolidation and fostering strategic alliances will have the potential to strengthen the position of the industry to compete more effectively as the market becomes increasingly deregulated and liberalised. In particular, in fostering strategic alliances within the industry, the foreign shareholding limit for new entries in direct insurers has been increased from 30% to 49% to harness the potential for financially strong and internationally known foreign players. This would contribute towards enhancing the development of domestic capabilities, particularly in the areas of technical expertise, innovation and improved operating processes. This will provide an additional avenue for potential foreign partners to  4  BIS Review 76/2006  participate more substantively in the domestic industry through a strategic equity interest in existing licensed insurers. As part of efforts to promote good risk management practices in the financial system, the Bank will also consider introducing differentiated premium contributions to the insurance guarantee scheme fund, based on the risk profile of individual insurers. This is similar to that being adopted for the deposit insurance system in the banking sector.
Since the number of transactions in Swedish kronor between panel banks has decreased, the STIBOR framework states that the banks' submissions can be based on judgements of their borrowing costs in foreign currency. The Riksbank considers this unfortunate and that a reference rate in Swedish kronor should be anchored in transactions in Swedish kronor only. The definition of SWESTR is similar to those in euro, British pounds and Danish kronor. Like the ECB, the Bank of England and Nationalbanken in Denmark, the Riksbank has chosen to use deposit transactions with overnight maturity, and with a counterparty group that is wider than just the panel banks. The main reason is that this part of the money market tends to exhibit good and relatively stable transaction volumes, even in difficult times. The transition to SWESTR should begin now – it is a process that will take several years and some adjustments are required As SWESTR is now available, there is an alternative to STIBOR. We therefore call on market participants to step up their efforts for a transition to SWESTR. 5 [8]  However, in order for us to reach a point where transaction-based reference rates dominate in the market in Sweden and internationally, certain adjustments are required in the financial markets. This process needs to run over several years. The greatest need for adjustment probably concerns maturities. The traditional interbank rates are available at several different maturities, for example three and six months. However, SWESTR and its international equivalents are only calculated at the shortest maturity, overnight.