The Revised Swiss Insurance Supervision Act

The Swiss insurance sector is on the cusp of significant regulatory transformation. Set to take effect on January 1, 2024, the revised Ordinance on the Supervision of Private Insurance Companies (SO) and the Insurance Supervision Act (ISA) promise to reshape the landscape for insurance companies and intermediaries. This article delves into the pivotal changes, highlighting the opportunities and challenges that lie ahead, from the introduction of a groundbreaking 'sandbox' regime to stricter regulations for insurance intermediaries. As the industry braces for these changes, understanding the nuances of these regulations becomes crucial for compliance and future growth.

Innovation in Supervision: The Sandbox Regime for Small Insurers

Under certain conditions, smaller primary insurance and reinsurance companies could benefit from simplifications in supervision. Subject to the fulfilment of regulated criteria, a "license-free innovation area" (so-called sandbox) will even be created for very small businesses. The decisive factor is the volume of business. The business may comprise a maximum of 5,000 policies with a maximum total premium volume of CHF 5 million. The use of the sandbox is also limited to selected classes of non-life insurance; life insurance, accident and health insurance are not included.

Enhanced Flexibility in Non-Insurance Business Activities

Furthermore, FINMA will be able to approve the operation of transactions unrelated to the insurance business if the interests of policyholders are not endangered, the insurance companies control the associated risks and FINMA's supervision is not made disproportionately difficult. In individual cases, the insurance company should be allowed to explain to FINMA in detail the nature of the "non-insurance" business that is affected.

Introduction of Insurance Special Purpose Vehicles (SVPs)

The legislator is now regulating special purpose insurance vehicles. The main characteristic of an insurance special purpose vehicle is that it does not qualify as an insurance company. The detailed rules are intended to ensure that such companies can also establish themselves in Switzerland with legal certainty.

Evolving Distribution Rules for Life Insurance Policies

Specific requirements for the distribution of qualified life insurance policies have been newly introduced - including those relating to advertising, a so-called basic information sheet, appropriateness testing and documentation obligations. Other changes concern the level-appropriate anchoring of statutory solvency requirements. The Swiss Solvency Test (SST) is used to measure whether these are met. The personal responsibility of insurance companies is strengthened by the fact that they now have the option of choosing between two options regarding the structure of their tied assets: (1) drawing up an individual list of assets, which must be approved by FINMA, or (2) using assets from the list contained in the SO.

Adapting to Stricter Regulations for Insurance Intermediaries

The distinction between tied and untied insurance intermediaries is becoming increasingly important. Customers must always be informed about the type of insurance intermediary. It will no longer be possible to register tied insurance intermediaries in the FINMA register. Stricter regulations in the area of insurance intermediary services will mean, among other things, that foreign insurance intermediaries must establish a branch in Switzerland, subject to regulated exceptions. Higher requirements also apply to insurance intermediaries in other respects. These relate to personal requirements, company management and minimum standards regarding corporate governance. To comply with this, insurance intermediaries who are already registered have been granted a transitional period until June 30, 2024. The training and further education obligation is also specified, the new license will only be valid for 2 years. For already registered insurance intermediaries, a transitional period until December 31, 2025, applies in this regard. Detailed information and disclosure obligations regarding further training and compensation as well as reporting obligations form a further subject of regulation. Finally, insurance companies must also ensure that the tied and non-tied insurance intermediaries working for them meet the legal requirements. This also applies to the sale of insurance via electronic platforms.

Conclusion: Preparing for the Implementation Change

The integration of the numerous adjustments will cause a great deal of administrative work in the insurance industry. This is all the truer considering the short implementation period of a few months. The current business processes and documentation must therefore be subjected to a legal review on a case-by-case basis to specify the need for action and enable legally compliant implementation. Act now to transform these regulatory challenges into opportunities for innovation and growth in your business. Reach out for expert guidance and start your process towards seamless adaptation and strategic foresight.