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I had the same problem on my V70. One of our experts on the UK Volvo Owners' Club gave me the instructions to sort it, as follows. They worked for me!
The problem was a poor connection on the immobilizer antenna ring, this is round the ignition lock barrel.
You can gain access to it by removing the lower cover from the steering column.
The resistance of the coil should be 5 ohms +/- 10%
Check the coil resistance and the illumination lamp for poor contact.
Just removing the conection cleaning it and replacing it should do it.
Be careful not to damage the orange wiring to the air bag.
--
Graham
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