(Corrects in third paragraph to "corporate bonds" from fixed "income bonds".)
STOCKHOLM, Dec 15 (Reuters) - Sweden's financial regulator said on Thursday it had dropped plans to change its so-called traffic light model for insurers after companies had argued the proposed changes constituted an additional capital requirement.
The Financial Supervisory Authority (FSA) said in a statement that changes in the model could have major consequences for the companies' asset allocation and may by extension affect the stability of Swedish capital markets.
"Some assets would have been less favourable to hold in the model, for instance corporate bonds and mortgage bonds, and FSA has taken it to heart," Swedbank analyst Ingrid Wallin-Johansson said.
"We will probably see some market reactions on this - it is positive for mortgage bonds and not so good for government bonds".
FSA said in October it wanted to revamp their model that assess whether insurers can meet their pension payout commitments.
To help guarantee their liabilities, pension fund managers were asked to hold a certain proportion of their assets in low-risk instruments such as government debt, a proposal that risked cutting bond market liquidity, analysts said.
Instead of introducing the new model, the FSA will ask companies to provide complementary information about potential risks in their operations.
Reporting by Johan Sennero; Editing by Alistair Scrutton