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Ownership and organisational requirements

Ownership of (re)insurers

Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?

While no specific restrictions on foreign ownership of or investment in (re)insurers in Switzerland apply, information regarding persons holding at least 10% of the share capital or voting rights in a (re)insurer must be submitted to the Financial Market Supervisory Authority (FINMA) in the course of the licensing process. FINMA must also be informed if a person may exert a significant influence on the commercial activities of the (re)insurer. FINMA will consider this information for the purpose of evaluating the licence application.

What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?

Any party which intends to acquire a participation in an existing Swiss (re)insurer must inform FINMA if such participation reaches 10%, 20%, 33% or 50% of the share capital or voting rights. The same notification obligation applies if an existing participation falls below these thresholds. FINMA may prohibit the transaction or impose conditions if the nature or extent of the participation might endanger the (re)insurer or the insureds’ interests.

If a (re)insurer merges, splits or undergoes transformation, FINMA's approval is required. FINMA will examine whether the insured parties remain protected against insolvency risks on the part of the acquiring company. The companies affected must ensure that pre-exiting insurance relationships continue unchanged.

Further disclosure obligations and restrictions may apply under the Stock Exchange Act and the Cartel Act, depending on the circumstances. 

Organisational requirements

Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?

(Re)insurers must take the legal form of a company limited by shares or a cooperative society. The predominant legal form in the Swiss (re)insurance market is a company limited by shares.

Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?

(Re)insurers must be organised in a manner that allows them to identify, limit and monitor all main risks. They must implement the following corporate governance principles throughout their organisation:

  • clear allocation and documentation of duties, powers, responsibilities and reporting channels;
  • clear separation of operational activities and control activities;
  • establishment of internal reporting processes to share information with all relevant units or individuals in the company;
  • documentation of key decisions (and associated measures);
  • establishment of effective company-wide risk management and an effective internal control system, including the control functions (eg, risk management, compliance and internal audit) and periodic reviews of their appropriateness by an independent (internal or external) party;
  • definition of principles, processes and structures for compliance with legal, regulatory and internal requirements;
  • definition of principles, processes and structures for identifying and dealing with abuses and conflicts of interest;
  • definition of principles relating to the conduct expected of employees;
  • establishment of processes to ensure that individuals responsible for overall direction, supervision and control, as well as the executive management of the (re)insurer, have and maintain the required standards.

The board of directors as a body must have sufficient knowledge of the (re)insurance business and requisite experience and knowledge of business management, strategic management, risk control, and finance and accounting. The top management, including the actuary, must also meet fit and proper requirements.

The eligibility of directors and officers is assessed in the course of the licencing process and continuously monitored by FINMA. 

Operating requirements

Authorisation procedure

Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?

As a matter of principle, an insurance contract made with a policyholder located in Switzerland, or covering a risk located in Switzerland, can be written only by a (re)insurer holding a Swiss licence. Accordingly, all (re)insurers falling within the Insurance Supervision Act’s remit must obtain a licence from the Financial Market Supervisory Authority (FINMA) before operating on the Swiss market.

The Insurance Supervision Ordinance allows non-admitted insurance by companies abroad in the following cases:

  • cover of risk in connection with shipping on the high seas, aviation and cross-border transportation;
  • cover for risks lying abroad; and
  • cover for war risks.

Reinsurers domiciled in Switzerland must also be licensed to conduct reinsurance activities, but this rule does not apply to companies registered abroad that offer only reinsurance in Switzerland. Reinsurance captives that are authorised in Switzerland and cover only the risks of their own group require a Swiss licence.

A (re)insurer seeking approval to carry out insurance or reinsurance activities on the Swiss market must submit a formal application to FINMA together with a business plan. The application is usually submitted in draft form for discussion purposes and can be finalised after further information has been exchanged with FINMA.

Once the application has been completed, FINMA can be expected to take between three and six months to grant the licence. 

Financial requirements

What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?

The minimum capital for (re)insurers operating in Switzerland is between Sfr3 million and Sfr20 million, depending on the sector (ie, life insurance, non-life insurance, health insurance or reinsurance). FINMA determines the actual capital required in each case.

(Re)insurers must also have adequate disposable and unencumbered capital resources to cover the entirety of their activities (ie, they must have an adequate solvency margin).   The solvency margin is assessed in accordance with the Swiss Solvency Test (SST). The determination of the required equity capital takes into account the risk to which a (re)insurer is exposed during the following year (target capital) and the available eligible equity capital (risk-bearing capital). The SST involves an analysis providing for a market-consistent valuation of all assets and liabilities. It takes a methodological approach to risk categories (ie, insurance, credit and market risks), subjecting them to scenario stress tests by means of either a standard model or an internal model. The idea is to clarify the risks the balance sheet is exposed to and their effect on the available capital in a worst-case scenario.

The concepts of the SST and Solvency II (the corresponding EU project) are similar. The EU recognises the SST as equivalent to EU law, which simplifies the activity of Swiss (re)insurance groups in the European Union. In particular, reinsurers can now serve their EU clients directly from Switzerland. 

Further, (re)insurers operating in Switzerland must maintain an organisational fund that enables them to cover the costs of establishing and developing the business or an extraordinary business expansion. The organisational fund normally amounts to up to 50% of the minimum capital specified above at the start of business operations. Again, FINMA determines the required amount in each individual case.

Do any other financial requirements apply?

In addition to the capital and solvency requirements outlined above, (re)insurers domiciled in Switzerland must establish adequate reserves to cover their entire commercial activities (ie, technical reserves).

Moreover, insurers must secure claims arising from their insurance contracts by means of tied assets. Owing to this rule, insured persons have a liability substrate that ensures that their claims under the insurance contracts will be satisfied before the claims of all other creditors if the insurer becomes insolvent.

The amount of tied assets is equal to the technical reserves plus a reasonable additional amount determined by FINMA.

The provisions concerning tied assets do not apply to reinsurers. Reinsurers have little restrictions regarding the investment of their assets, provided that they comply with general rules on risk diversification.

Personnel qualifications

Are personnel of (re)insurers subject to any professional qualification requirements?

A (re)insurer’s board of directors must have sufficient knowledge of the (re)insurance business and the requisite experience and knowledge of business management, strategic management, risk control and finance and accounting.

All (re)insurers must appoint a responsible actuary. The actuary reports directly to the senior management and is responsible for:

  • the correct calculation of the solvency margin;
  • compliance with the requirements concerning the tied assets;
  • the application of accounting principles; and
  • the accumulation of technical reserves.

Accordingly, the actuary must be professionally qualified and in a position to make an accurate assessment of the financial effects of the (re)insurer’s activities. 

Business plan

What rules and requirements govern the business plans of (re)insurers?

As outlined above, a (re)insurer seeking a licence must submit its business plan to FINMA for approval. The Insurance Supervision Act provides for specific information and documents to be included in the business plan. In essence, the applicant must:

  • state what type of insurance business it intends to conduct and in which classes it wishes to insure;
  • satisfy FINMA that the persons responsible for the management and supervision have a good reputation, as well as sufficient professional knowledge and experience to run the business;
  • demonstrate that it can meet the capital, solvency and other financial requirements.

FINMA must be notified about business plan changes. 

Risk management

What risk management systems and procedures must (re)insurers adopt?

(Re)insurers must implement an effective risk management system (ie, they must ensure by appropriate organisational measures that all material risks are detected, limited and monitored). Risk management principles also apply to major outsourcing arrangements and other relationships with third parties.

Reporting and disclosure

What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?

(Re)insurers must produce an annual report including their financial statements as of December 31 each year. (Re)insurers that are part of a group or conglomerate must also produce consolidated financial statements. Listed companies must comply with the reporting and disclosure requirements set out in the Stock Exchange Act.

In addition, (re)insurers must produce an annual supervisory report for FINMA. The supervisory report contains qualitative and quantitative data, which FINMA uses as a basis for its annual report on the insurance market.

FINMA can ask (re)insurers for additional reports throughout the year and define special requirements for the annual report and financial statements.

Other requirements

Do any other operating requirements apply in your jurisdiction?

Specific requirements apply to foreign insurers engaging in the insurance business in Switzerland. They must (without prejudice to differing provisions in international agreements):

  • have approval to exercise the insurance activity in their country of registration;
  • establish a presence in Switzerland and appoint a general agent who must be of good standing and provide assurance of proper business conduct. The general agent must reside in Switzerland and have authority for and be entrusted with the management of the office for the Swiss business. He or she must have the knowledge necessary to manage the insurance undertaking;
  • have a minimum capital and solvency margin in their country of principal registration equal to that specified in the Insurance Supervision Act;
  • establish in Switzerland an organisational fund equal to that specified in the act, together with corresponding assets;
  • lodge a surety in Switzerland equal to a specified percentage of the solvency margin accruing to the business in Switzerland. FINMA determines this percentage and the method of calculation, as well as the place of deposit and the assets allowable for this purpose. According to the agreement between the European Union and Switzerland on direct insurance other than life insurance, the security deposit requirement does not apply to EU-based insurers.  


What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?

FINMA can revoke the licence if a (re)insurer no longer fulfils the requirements for its activity or seriously violates the supervisory provisions. The (re)insurer then loses its right to carry out its business activity.

Depending on the circumstances, FINMA may also apply protective measures or penalties, including:

  • a reprimand in a declaratory ruling;
  • specific orders to restore compliance with the law; or
  • publication of a supervisory ruling.

If FINMA detects a serious violation of supervisory provisions, it may prohibit the person responsible from acting in a management capacity for a (re)insurer. The prohibition from practising a certain profession can be imposed for up to five years.

FINMA may confiscate any profit that a (re)insurer or responsible person in a management position has made through a serious violation of supervisory provisions. FINMA also has the power to confiscate if a loss was prevented through a serious violation of supervisory provisions. Where the extent of the assets to be confiscated requires a disproportionate effort to be ascertained, FINMA may make an estimate. The confiscated assets go to the Swiss Confederation, unless they are paid to the parties suffering loss.

In addition, the insurance supervisory law provides for criminal penalties that are investigated by public prosecutors and sentenced by the criminal courts. In particular, those parties which intentionally conduct insurance business in Switzerland without appropriate authorisation are liable to a custodial sentence of up to three years or a monetary penalty. In case of negligence, a fine of up to Sfr250,000 can be imposed.

A custodial sentence of up to three years or a monetary penalty can also be imposed on parties which:

  • conclude or negotiate insurance contracts for an insurer not approved for insurance activities in Switzerland;
  • fail to make certain notifications to FINMA;
  • remove or encumber tied assets so that the specified sum is no longer secured; or
  • act in a way that reduces the security of the tied assets.

Further penalties may apply under the Criminal Code. 

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