The Swiss Confederation (Switzerland) and the United Kingdom (UK) on 24 January 2019 signed the Agreement between the United Kingdom and the Swiss Confederation on direct insurance other than life assurance (UK-Swiss Direct Insurance Agreement).
The new UK-Swiss Direct Insurance Agreement replicates the terms of the existing agreement between Switzerland and the European Union (EU-Swiss Direct Insurance Agreement). The existing EU-Swiss Direct Insurance Agreement allows non-life insurance companies to branch into one jurisdiction from the other with greater ease e.g. through mutual recognition of each other's solvency requirements.
By replicating the effects of the existing EU-Swiss Direct Insurance Agreement the new UK-Swiss Direct Insurance Agreement provides continuity and certainty for Swiss and UK non-life insurers as the UK prepares to leave the EU. The new UK-Swiss Direct Insurance Agreement will come into force once the UK is no longer subject to the existing EU-Swiss Direct Insurance Agreement.
Switzerland is not a member of the European Union (EU) nor the European Economic Area (EEA). While Swiss insurers can distribute their policies on a cross-border basis directly into Liechtenstein under the Agreement of 19 December 1996 between the Swiss Confederation and the Principality of Liechtenstein on Direct Insurance and Insurance Intermediation they still need to establish a subsidiary or branch office if they intend to distribute policies into other countries of the EU/EEA (and vice-versa).
Existing EU-Swiss Direct Insurance Agreement
The existing EU-Swiss Direct Insurance Agreement of 10 October 1989 allows non-life insurance companies (e.g. household, motor vehicle, travel and liability insurance) to establish and operate branches in a country of the other contracting party. The Agreement lays down, on a reciprocal basis, the conditions which are necessary and sufficient to enable branches of non-life insurance companies whose head office is situated in the territory of one of the contracting parties and which wish to become established in the territory of the other contracting party to pursue the activity of direct insurance.
A key element of the existing EU-Swiss Direct Insurance Agreement is the mutual recognition of solvency requirements. Switzerland and the EU have recently adapted their Direct Insurance Agreement since both parties have modernised their solvency systems over the past years (Switzerland introduced the Swiss Solvency Test in 2011, and the EU has been applying Solvency II since 1 January 2016). The Agreement was adapted to reflect the new requirements on 3 July 2018 and the changes entered into force immediately. As a consequence, Swiss insurance companies that were previously required to calculate and report Solvency I in addition to the SST were exempted from this requirement.
New UK-Swiss Direct Insurance Agreement
Since with Brexit, the existing EU-Swiss Direct Insurance Agreement will no longer apply to the UK, the new UK-Swiss Direct Insurance Agreement replicates the terms of the existing EU-Swiss Direct Insurance Agreement. It will therefore ensure continuity for Swiss and UK insurers accessing each other’s markets, consistent with the terms of the existing EU-Swiss Direct Insurance Agreement. The UK-Swiss Direct Insurance Agreement was signed on 24 January 2019 at the World Economic Forum in Davos, Switzerland, and will come into force when the existing EU-Swiss Direct Insurance Agreement ceases to apply to the UK (e.g. 30 March 2019 if the UK were to withdraw from the EU without a deal on 29 March 2019).