Insurance Comparative Guide -

1 Legal framework

1.1 Which legislative and regulatory provisions govern the insurance sector in your jurisdiction?

In principle, Swiss insurance undertakings that engage in direct insurance or reinsurance, as well as foreign insurance undertakings that cover Swiss risks, fall under the supervision of the Swiss Financial Market Supervisory Authority (FINMA) and must obtain a licence from FINMA before conducting regulated activities. Also subject to FINMA supervision are insurance groups, insurance conglomerates and independent insurance intermediaries.

The core elements of FINMA's insurance supervision are set out in:

the Federal Insurance Supervision Act (SR 961.01); and
its implementing ordinances:
- the Federal Ordinance of 9 November 2005 on Insurance Supervision (SR 961.011) (ISO);
- the FINMA Ordinance of 9 November 2005 on Insurance Supervision (SR 961.011.1); and
- the FINMA Ordinance of 17 October 2012 on Insurance Bankruptcy (SR 961.015.2).

In addition, FINMA sets out financial regulations, including insurance regulations, in numerous circulars.

Social insurance schemes – including mandatory health and occupational accident insurance, as well as pension funds – are subject to supervision by:

the Swiss Federal Office of Public Health;
the Swiss Federal Office of Social Insurance; and
the impartial Occupational Pension Supervisory Commission.

1.2 Which bilateral and multilateral instruments on insurance have effect in your jurisdiction?

Switzerland is a member of neither the European Union nor the European Economic Area. Although Switzerland tends to enact 'euro-compatible' legislation, in principle it retains independence in regulating its financial markets. However, Switzerland has entered into the following treaties relating to bilateral and multilateral instruments on insurance:

the Agreement between the Swiss Confederation and the European Economic Community on Direct Insurance other than Life Insurance of 10 October 1989;
the Agreement between the Swiss Confederation and the United Kingdom on Direct Insurance other than Life Insurance of 25 January 2019; and
the Agreement between the Swiss Confederation and the Principality of Liechtenstein on Direct Insurance and Insurance Intermediation of 19 December 1996, supplemented by the Agreement between the Swiss Confederation and the Principality of Liechtenstein on Insurance against Natural Disasters of 10 July 2015.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

The following undertakings are subject to FINMA supervision:

insurance undertakings with a registered office in Switzerland that conduct direct insurance or reinsurance activities; and
foreign insurance undertakings (ie, companies that have their seat abroad) that conduct insurance activities in or from Switzerland.

Insurance undertakings are entitled to commence insurance operations once they have been authorised by FINMA. The licence will be granted for one or more insurance lines; these lines of insurance are set out in Annex 1 of the ISO. FINMA's licensing requirements are rather strict and if an insurance undertaking conducts regulated business without a licence, FINMA will commence an investigation.

Once FINMA has granted a licence, it applies prudential supervision to protect the interests of insureds. In addition to general regulatory controls, FINMA can conduct on-site supervisory reviews. These in-depth reviews usually take place every second or third year. FINMA analyses compliance with pre-defined regulatory requirements and will take measures if it is not satisfied as to compliance. These measures include:

follow-up inspections;
the creation and approval of an action plan; and
ultimately, licence revocation.

If an insurance undertaking fails to comply with regulatory requirements, or if the interests of insureds otherwise appear to be at stake, FINMA will take such protective measures as it deems necessary to safeguard the interests of insureds. These measures include:

prohibiting the free disposal of assets of the insurance undertaking;
ordering the deposit or freezing of assets;
transferring all or part of the powers of the insurance undertaking's governing bodies to a third party;
ordering the realisation of tied assets; or
ordering the deferment of payment in the event of a risk of insolvency.

FINMA can also withdraw an insurance undertaking's licence. If FINMA withdraws the licence to conduct insurance business, it will:

dissolve the insurance undertaking;
appoint a liquidator; and
supervise his or her activities.

Also, FINMA regularly publishes rulings on insurance law and ensures the appropriate publication of the measures taken if this is considered necessary for their enforcement or for the protection of third parties.

1.4 What is the regulators' general approach in regulating the insurance sector?

FINMA adopts a principle-based, risk-oriented approach to its supervision of insurance undertakings: the greater the risk potential of an insurance undertaking, the more intensive the supervision. In general, all insurance undertakings must obtain a licence for their business activities from FINMA. As part of the application for the licence, each company must submit a business plan.

The business plan must contain specific corporate and financial information, including, in particular:

details of the insurer's organisational structure and the range of activities to be carried out in Switzerland;
details of the insurance group or insurance conglomerate to which the insurance undertaking belongs;
the contemplated insurance lines;
a calculation of tied assets and technical reserves;
information on the corporate governance and auditing structure;
a balance sheet and statements of income for the first three financial years;
information on the tariffs; and
the general insurance conditions to be used in Switzerland.

The legal form of an insurance undertaking must be a company limited by shares or a cooperative. The predominant legal form of insurance undertakings is a company limited by shares.

2 Insurance contracts

2.1 What are the main types of insurance available in your jurisdiction?

Under Swiss law, neither the Federal Insurance Supervision Act (ISA) nor the Federal Insurance Contract Act (ICA) (SR 221.229.1) contains a legal definition of 'insurance' or 'insurance contract'. However, the concept of 'the object of insurance' set out in Article 16(1) of the ISA implies that persons, property and assets can be insured; and accordingly, the ISA distinguishes between personal, property and asset insurance (eg, liability insurance is considered asset insurance). Also inherent in Swiss law is the classification of insurance according to the insurer's obligation to pay under the policy; therefore, insurance is divided into indemnity insurance and non-indemnity insurance, where the insured is covered for a benefit in the form of the payment of a sum of money that is determined by agreement.

In addition, Annex 1 of the Insurance Supervision Ordinance provides the lines of insurance available in Switzerland. These lines are set out in the table below.

Life	Non-life (general insurance)	Reinsurance
A1 Collective life insurance in the context of pension plans.	B1 Accident.	C1 Reinsurance underwritten by reinsurer (no direct insurance).
A2 Life insurance linked to investment funds' units.	B2 Illness.	C2 Reinsurance for direct insurer.
A2.1 Capital insurance linked to investment funds' units, with payment on death or in case of disability.	B3 Hull insurance for motor vehicles (excluding rolling stock).	C3 Intra-group reinsurance (captive).
A2.2 Capital insurance linked to investment funds' units, with payment or death or in case of disability and guarantee on survival.	B4 Hull insurance for railway rolling stock.
A2.3 Annuities linked to investment funds' units.	B5 Hull insurance for aircraft.
A2.4 Life insurance linked to internal funds or to some other reference values, with payment on death or in case of disability.	B6 Hull insurance for naval and inland navigation vessels.
A2.5 Life insurance linked to internal funds or to some other reference values, with payment on death or in case of disability and guarantee on survival.	B7 Cargo insurance (including goods, luggage and all other items).
A2.6 Annuities linked to internal funds or to some other reference values.	B8 Fire and natural hazards
A3 Other life insurance.	B9 Other property damages.
A3.1 Individual capital insurance on survival and on death.	B10 Third-party liability for self-propelled land vehicles.
A3.2 Individual annuities.	B11 Third-party liability for aircraft.
A3.3 Other individual life insurances.	B12 Third-party liability for sea, lake and river vessels.
A3.4 Collective insurance on survival outside the scope of pension.	B13 General third-party liability.
A4 Insurance against death and disability resulting from accidents.	B14 Credit.
A5 Insurance against death and disability resulting from sickness.	B15 Surety
A6 Capital redemption operations.	B16 Miscellaneous financial loss.
A6.1 Fund shares bound capital redemption operations.	B17 Legal services.
A6.2 Internal portfolio bound capital redemption operations.	B18 Tourist assistance.
A6.3 Other capital redemption operations
A7 Tontines.

Insurance undertakings can commence insurance operations as soon as they have been authorised by the Swiss Financial Market Supervisory Authority. The licence can be granted for one or more insurance lines.

2.2 Are all insurance contracts regulated? What terms do they typically include?

The legal framework for direct insurance contracts is set out in the ICA, which:

governs the civil law implications between insurer, policyholder and insured; and
sets out some rules in respect of aggrieved third parties.

The general provisions of the Code of Obligations apply to the extent that the ICA contains no specific regulation to a particular (legal) issue.

Reinsurance contracts are exempt from the ICA's scope of application. They are subject to the provisions of the Code of Obligations. Swiss law, however, lacks a legal definition of 'insurance' and/or an 'insurance contract'.

The Federal Supreme Court usually refers to an 'insurance contract' as a stipulation of an insurer, in return for payment of a premium, to perform an economic benefit to the insured if an insured risk materialises. Under Swiss law, an insurance contract is therefore considered a synallagmatic contract providing for the transfer of risk in exchange for a premium. It must be distinguished from contracts of gambling and betting, and from guaranties, warranties and sureties.

In practice, direct insurance contracts usually come with the insurer's general standard terms and conditions (GTCs). Such GTCs take effect:

if they are specifically referenced on the conclusion of the contract; and
only to the extent that specific individual agreements do not deviate from the provisions in the GTCs.

The GTCs are also subject to Article 8 of the Federal Unfair Competition Act (SR 241), which provides that a term in the GTCs will be deemed abusive if it creates a significant and unjustified disparity between contractual rights and obligations to the detriment of the insured in a manner that breaches the principle of good faith. This norm empowers the courts:

to review the contents of GTCs in business-to-consumer contracts; and
to void any clauses that do not meet the requirements of Article 8.

However, the Federal Supreme Court's practice implies that it is common sense that insurance contracts contain coverage exclusions. If in doubt, ambiguous terms in GTCs are to be interpreted to the detriment of the party that drafted them. In the GTCs of insurance contracts, ambiguous clauses are thus to be interpreted against the insurer as their author. Article 33 of the ICA sets out the ambiguity rule, in that the insurer is liable for all events that bear the characteristics of the insured peril unless the contract excludes individual events from the insurance in 'specific, unambiguous wording'. It is thus up to the insurer to precisely limit the scope of the obligations it wishes to assume.

2.3 What are the formal and documentary requirements for conclusion of an insurance contract?

The ICA compels the insurer to issue an insurance policy that sets out the rights and obligations of the parties to the contract. The policy thereby assumes the function of evidence.

In principle, Swiss law states that it is the insured which provides the insurer with an offer to bind insurance. The insured is bound to its declaration for a period of 14 days, and it is up to the insurer to accept or decline the conclusion of the contract. The insured is not bound to its declaration if the insured does not accept to bind insurance within the aforementioned 14-day period. On the other hand, the insurer will be deemed to have accepted cover where the insured requests the extension or amendment of an existing insurance contract, if the insurer does not decline such offer. Meanwhile, the insured is also entitled to revoke its declaration to bind insurance only in written form or in any other form that allows the declaration to be recorded in text form (eg, by email), within the same 14-day period.

According to the applicable principles under the Code of Obligations, the genuine will of the parties to the contract is key to any contractual interpretation, including the interpretation of insurance contracts. Thus, a Swiss court must first establish the parties' real intent, which may differ from their written statements. If the court cannot ascertain the parties' intentions or if there is no consensus, the court will resort to the parties' presumptive intent. The court thus objectively establishes how the parties, given all circumstances, could and should have understood the contract's contested clause or clauses in good faith.

Please also see question 2.2.

2.4 What are the procedural requirements for conclusion of an insurance contract?

Please see questions 2.2 and 2.3.

2.5 What are the respective obligations and liabilities of insurer and insured, both on concluding an insurance contract and during its term? What are the consequences of any breach?

Within the ambit of the ICA, Swiss law departs from the risk declaration paradigm, adhering to the doctrine of utmost good faith and its associated sub-doctrines of representation and non-disclosure. The insurer is responsible for obtaining the necessary information to assess the risk. In respect of the relevant risk factors, the insured must disclose only the information that the insurer has explicitly requested. If the party requesting to bind insurance does not disclose the requested information correctly or represent the risk adequately, or in case of misrepresentation or false declaration referring to a significant fact of risk or material fact, the insurer is entitled to rescind the policy. However, the insurer must rescind the policy within four weeks of the date on which it became aware of the misrepresentation or non-disclosure.

However, the principle of utmost good faith comes into play in reinsurance contracts. The direct insurer must disclose all information needed by the reinsurer to make its underwriting decision. Swiss law does not recognise the English law concept of 'warranty'.

In addition, an insurance contract may impose additional obligations on the policyholder or insured which apply during the period of insurance or upon the occurrence of the insured event. The insurance contract may also specify the remedies to apply in the event of breach of such obligations, including forfeiture of the claim. According to Article 45(1) of the ICA, however, forfeiture of the claim in the event of breach is in principle considered enforceable only if:

the breach is not to be regarded as one without fault; or
the policyholder proves that the breach had no impact on:
- the occurrence of the insured event; or
- the extent of the benefits agreed in the insurance contract.

3 Making a claim

3.1 What are the formal and documentary requirements for making a claim?

In principle, the insurance contract sets out the formal and documentary requirements for making a claim. However, Article 41(1) of the Insurance Contract Act (ICA) provides that a claim under an insurance contract only becomes due four weeks after the point in time at which the claimant has provided the insurer with all information that will enable it to assess the circumstances and the claim. In addition, Article 46(1) sets out a prescription period of five years for a claim under an insurance contract.

3.2 What are the procedural requirements for making a claim?

If the insured event has occurred, the policyholder, the insured or any other person entitled to claim for benefit under the insurance contract must notify the insurer as soon as it becomes aware of this event and its claim under the insurance contract. The insurance contract may also stipulate that the notification must be made in writing. If the policyholder, the insured or other person entitled to claim for benefit under the insurance contract has culpably breached the duty of notification, the insurer can reduce the compensation by the amount by which it would have been reduced had the notification been made in good time.

3.3 On what grounds can the claim be denied? How can the insured challenge the denial of claim?

A claim may be denied based on the particulars of coverage in the policy, including the breach of obligations during the period of insurance or upon the occurrence of the insured event (see questions 2.5 and 3.2). In practice, the Swiss courts tend to assume that, as a result of the insurer's denial, the insurer has all relevant information to assess cover under the insurance contract, so that the claim under the contract will ultimately be considered due from the date of denial if the court finds that the denial was without merit.

Several Swiss insurance undertakings have agreed to promote the services of the Swiss Insurance Ombudsman and thus allow policyholders and insureds to submit the insurer's denial for assessment to the ombudsman. The ombudsman, however, only has the power to mediate and cannot render enforceable awards. Mediation before the ombudsman is free of charge.

3.4 How can third parties make a claim?

Following the amendment of the ICA on 1 January 2022, Article 60(1bis) provides for a direct claim of an aggrieved/damaged third party against the liability insurer of the liable person to the extent of its existing insurance cover. This claim is subject to the defences which the insurer may raise under law or the insurance contract.

4 Form and structure of insurers

4.1 What types of insurance companies are typically found in your jurisdiction?

The legal form of an insurance undertaking must be a company limited by shares or a cooperative. The predominant legal form of insurance undertakings is a company limited by shares.

4.2 How are these insurance companies typically structured and funded?

Depending on the insurance lines, the Swiss Financial Market Supervisory Authority (FINMA) requires that an insurance undertaking have a minimum capital of between CHF 3 million and CHF 12 million. In addition to the minimum capital requirements, the insurance undertaking must establish an organisational fund to cover its set-up and incorporation costs. FINMA specifies the amount that must be held in the organisational fund on a case-by-case basis. Every insurance undertaking must appoint a responsible actuary and grant him or her access to all commercial and financial documents and information.

4.3 Are there any restrictions on foreign ownership of insurance companies?

There are no insurance regulatory restrictions that prevent foreign persons from acquiring all or some of the shares in an insurance undertaking or reinsurer domiciled in Switzerland. However, regardless of the acquirer's origin, based on Article 21 of the Insurance Supervision Act, anyone that intends to acquire or sell a direct or indirect interest in an insurance or reinsurance undertaking domiciled in Switzerland must notify FINMA if the interest reaches, exceeds or falls short of 10%, 20%, 33% or 50% of the capital or voting rights. In case of such qualifying holdings, the legislation does not specify a pre-approval requirement per se; but FINMA may prohibit the acquisition or impose conditions if the transaction could endanger the interests of insureds. Changes in the shareholding basis may further constitute an amendment of the business plan and must therefore be notified to FINMA as a business plan amendment.

5 Authorisation

5.1 What authorisations are required to provide insurance services in your jurisdiction? What activities do they cover?

Swiss domiciled insurers and reinsurers, and non-Swiss insurers undertaking direct insurance activities, must obtain a Swiss Financial Market Supervisory Authority (FINMA) licence for regulated activities in or from Switzerland. The licence covers engagement in direct insurance or reinsurance to cover Swiss risks.

By contrast, no licence is required from FINMA for:

insurance undertakings that have their registered office outside Switzerland, if they merely conduct reinsurance activities in Switzerland; or
insurance undertakings with their registered office outside Switzerland and without a branch office in Switzerland, if they only cover:
- risks relating to marine, aviation or international transportation;
- risks located abroad; or
- war risks.

Also excluded from the licensing requirement are certain insurance undertakings with a very limited scope of business.

5.2 What requirements must be satisfied to obtain authorisation?

Any insurance undertaking with a registered office in Switzerland and which conducts insurance business in or from Switzerland must be licensed by FINMA prior to underwriting insurance business. The conditions for the issue of a licence are set out in the Insurance Supervision Act and depend on the type of insurance lines that the insurer intends to underwrite. An insurance undertaking that seeks approval to carry out insurance activities must submit an application to FINMA together with a business plan.

The business plan must contain specific corporate and financial information, including, in particular:

details of the insurer's organisational structure and the range of activities to be carried out in Switzerland;
details of the insurance group or insurance conglomerate to which the insurance undertaking belongs;
the contemplated insurance lines;
a calculation of tied assets and technical reserves;
information on the corporate governance and auditing structure;
a balance sheet and statements of income for the first three financial years;
information on the tariffs; and
the general insurance conditions to be used in Switzerland.

Every insurance undertaking must appoint a responsible actuary and grant him or her access to all commercial and financial documents and information. The actuary is responsible for ensuring that:

the solvency margin is calculated correctly;
tied assets are in line with the regulatory requirements;
the proper accounting principles are used; and
adequate technical reserves are established.

Insurance undertakings must establish adequate reserves to:

guarantee their obligations and commitments under the insurance policies; and
cover their overall insurance activities.

The details of how technical reserves and tied assets are calculated are set out in the legislation and in specific circulars enacted by FINMA. Insurance undertakings must also have adequate and unencumbered capital at their disposal for their activities (solvency margin requirements).

The Swiss solvency test (SST) defines the necessary capital resources in relation to the risks to which an insurance undertaking is exposed (target capital). The resulting target capital is set against the creditable capital (risk-bearing capital). In Switzerland, the SST is the only accepted method for determining and evaluating compliance with solvency requirements.

5.3 What is the procedure for obtaining authorisation? How long does this typically take?

A licence application must be submitted to FINMA, along with the business plan. The duration of the licensing process depends on various factors, including:

the quality and completeness of the documentation submitted to FINMA; and
the complexity of the business plan.

It may take between three and six months to obtain a licence, but the process can last for a year or more.

6 Regulatory capital and liquidity

6.1 What minimum capital requirements apply to insurance companies in your jurisdiction?

The minimum capital requirements depend on the type of insurance business conducted. Depending on whether the insurance undertaking engages in life or non-life insurance and depending on the lines of insurance for which the insurance undertaking is seeking a license, the minimum capital requirements range from CHF 3 million to CHF 12 million. In special circumstances – namely, if the risk exposure of the insurance undertaking and the planned volume of business justify it – the Swiss Financial Market Supervisory Authority (FINMA) may deviate from the minimum capital requirements set out in the Insurance Supervision Ordinance.

6.2 What liquidity requirements apply to insurance companies in your jurisdiction?

Insurance undertakings must maintain adequate and appropriate forms of liquidity, although there is no distinct set of liquidity requirements.

7 Supervision of insurance groups

7.1 What requirements apply with regard to the supervision of insurance groups in your jurisdiction?

An insurance group (eg, a group consisting of various insurance undertakings) is considered to exist if all of the following conditions are met:

There are two or more companies;
At least one company in the group is an insurance undertaking;
The companies all primarily engage in insurance activities; and
The companies constitute an economic unit or are otherwise associated with each other by the means of influence or control.

An insurance conglomerate (ie, a group predominantly active in the field of insurance but also active in other capital market business, such as banking) is considered to exist if all of the following conditions are met:

There are two or more companies;
At least one company in the conglomerate is an insurance undertaking;
At least one company in the conglomerate is a bank or securities firm of significant economic importance;
The companies all primarily engage in insurance activities; and
The companies constitute an economic unit or are otherwise associated with each other by the means of influence or control.

The Swiss Financial Market Supervisory Authority (FINMA) may make insurance conglomerates and insurance groups subject to its supervision if:

they are managed from Switzerland; or
they are managed from abroad, but are not subject to an adequate conglomerate or group supervision in their home jurisdiction.

The Insurance Supervision Act (ISA) also grants FINMA the power to make arrangements with foreign regulators to coordinate the supervision of insurance conglomerates and insurance groups. Under the ISA, FINMA may exercise supervisory powers abroad (notably with regard to the foreign activities of insurance conglomerates or groups supervised by FINMA). It sets out a framework which ensures that non-public information is treated confidentially and used only for supervisory purposes. The cross-border supervisory activities are subject to reciprocity.

8 Reporting, governance and risk management

8.1 What key disclosure requirements apply to insurance companies in your jurisdiction?

An insurance undertaking must provide the Swiss Financial Market Supervisory Authority (FINMA) each year with an annual report in accordance with the Code of Obligations, as well as a supervisory report in accordance with the Insurance Supervision Act (ISA) and the Insurance Supervision Ordinance. The annual report consists of:

the annual financial statements;
a situation report; and
where appropriate, the consolidated financial statements.

The annual financial statements comprise:

the balance sheet;
the income statement; and
notes.

The supervision report contains extensive qualitative and quantitative data. FINMA is empowered to determine the requirements for the supervision report and annually issues guidelines for the supervision report. FINMA can also:

require additional reporting from insurance undertakings throughout the financial year; and
define special requirements for the annual report and financial statements.

8.2 What key reporting requirements apply to insurance companies in your jurisdiction?

Insurance undertakings must:

put in place efficient internal control systems; and
have an internal audit department (internal inspectorate), which must be independent from the management.

The external auditors must be licensed by FINMA. They must be independent from the insurance undertaking and assure a proper audit. Their duties encompass the review not only of the annual accounts, but also of compliance with supervisory legislation, including the proper business conduct requirement. The external auditors must immediately report to FINMA:

any material breaches of supervisory law by the insurance undertaking; and
any facts that could jeopardise the solvency of the insurance undertaking or the interests of insureds.

FINMA has the right to entrust the external auditors with additional tasks and order special investigations at the insurance undertaking's expense.

8.3 What key governance requirements apply to insurance companies in your jurisdiction?

Insurance undertakings must be organised in a manner that allows them to identify, limit and

control all main risks. The following principles must be implemented:

clear allocation and documentation of duties, powers, responsibilities and reporting;
clear separation of operational activities and control activities;
the establishment of internal reporting processes to share information within the entity;
the documentation of key decisions;
the establishment of effective company-wide risk management and an effective internal control system and periodic reviews of their appropriateness by an independent party;
the definition of principles, processes and structures for compliance with legal, regulatory and internal requirements, as well as for identifying and dealing with abuses and conflicts of interest;
the definition of principles with regard to the conduct expected of employees; and
the establishment of processes to guarantee that the individuals responsible for overall direction, supervision and control, as well as the executive management of the insurance undertaking, meet and maintain the requisite standards.

In 2015, FINMA launched a periodic online survey on corporate governance with supervised insurance companies. The survey includes questions about company structure, governing bodies and control functions. Also, FINMA Circular 2017/2 – Corporate Governance – Insurers sets out guidance on the corporate governance requirements expected of insurance undertakings.

8.4 What key risk management requirements apply to insurance companies in your jurisdiction?

Insurance undertakings must abide by the business plan they submitted during the licensing process. If a company intends to change the approved plan, the proposed changes must be approved by FINMA. Material business plan changes as specified in Article 5(1) of the ISA must be submitted to FINMA for prior approval. They can only be put into practice with FINMA's approval. Less important business plan changes must be notified to FINMA within 14 days of their implementation. These changes are generally approved; should further details be required, FINMA will contact the notifying insurance undertaking within four weeks.

9 Senior management

9.1 What requirements apply with regard to the management structure of insurance companies in your jurisdiction?

The persons entrusted with the ultimate direction, supervision and control and management must have a good reputation and ensure sound business practices. Therefore, members of both the board of directors and senior management must:

pass the fit and proper test; and
be approved by the Swiss Financial Market Supervisory Authority.

The eligibility of members of the board of directors and senior management is assessed during the licence application process as part of the business plan. Detailed provisions are set out in the ISO (see question 1.1) and in the FINMA Circular 2017/2.

9.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?

Please see questions 8.3 and 9.1.

9.3 What are the legal duties of directors and senior executives of insurance companies?

The general principles of corporate law also apply to directors and senior executives of insurance companies who, therefore, may be held liable personally in the event of breach of fiduciary duties, including breaches of regulatory requirements imposed under governance matters.

9.4 How is executive compensation regulated in your jurisdiction?

Based on general corporate law, board members or senior management may become personally liable in case of breach of fiduciary duties, which can also be triggered by regulatory breaches. Serious violations are further considered criminal offences that may result in personal liability.

10 Change of control and transfers of insurance companies

10.1 How are the assets and liabilities of insurance companies typically transferred in your jurisdiction?

The Insurance Supervision Act (ISA) addresses the transfer of a Swiss insurance portfolio and requires the approval of the Financial Market Supervisory Authority (FINMA) for the transfer. FINMA will approve the transfer if the interests of insured are safeguarded overall. In its assessment, FINMA will take into account:

the interests of policyholders of the transferred portfolio; and
the interests of policyholders of the transferring and acquiring insurance undertakings.

The corresponding insurance contracts are transferred by operation of law to the acquiring insurance undertaking upon FINMA's approval.

The consent of the policyholders is not required for the transfer. However, any policyholders that do not agree to the transfer have the right to terminate their policies. If FINMA approves the transfer of the insurance portfolio, the acquiring insurance undertaking is obliged to inform the policyholders taken over individually about the transfer and the right to terminate the contract.

The essentials of the portfolio transfer are stipulated in a transfer agreement between the transferring and acquiring insurance undertakings. These include:

the designation of the insurance portfolio concerned (inventory);
the time of transfer;
the transfer price;
determinations on technical provisions and tied assets; and
the delimitation of responsibilities for settling claims.

A portfolio transfer is generally combined with the transfer of related assets. In principle, such transactions are subject to the Merger Act 2003 (SR 221.301). However, FINMA, at its discretion, can make a portfolio transfer subject to its approval of the asset transfer too.

10.2 What requirements must be met in the event of a change of control?

Article 21(2) of the ISA provides that any party that intends to acquire or sell a direct or indirect interest in an insurance or reinsurance undertaking domiciled in Switzerland must notify FINMA if the interest reaches, exceeds or falls short of 10%, 20%, 33% or 50% of the capital or voting rights. In case of such qualifying holdings, the legislation does not specify a pre-approval requirement per se; but FINMA may prohibit the acquisition or impose conditions if the transaction could endanger the interests of insureds. Changes in the shareholding basis may further constitute an amendment of the business plan and must therefore be notified to FINMA as a business plan amendment.

11 Consumer protection

11.1 What requirements must insurance companies comply with to protect consumers in your jurisdiction?

The Insurance Supervision Act and the prudential supervision of the Swiss Financial Market Supervisory Authority aim to protect the interests of insureds, providing for solvency requirements and rules on tied assets on the permission of restructuring of an insurance undertaking.

Please also see question 1.3.

11.2 What other measures has the state implemented to protect consumers in the insurance sector?

Consumer protection is implemented through insurance contracts and mandatory provisions are also set out in the Insurance Contract Act, such as:

minimum information duties;
a withdrawal right for new insurance contracts; and
a termination right for long-term insurance contracts.

12 Data security and cybersecurity

12.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for insurance companies?

The use of customer data is subject to the Federal Data Protection Act (SR 235.1), which was recently amended. The amendments will come into force on 1 September 2023. As a general principle, data processing must be carried out in good faith and must be proportionate. Personal data may only be processed for the purpose that:

was indicated at the time of collection;
is evident from the circumstances; or
is provided for by law.

12.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for insurance companies?

Insurance undertakings supervised by the Swiss Financial Market Supervisory Authority (FINMA) must inform FINMA immediately of cyberattacks. FINMA has published a supervisory note (05/2020) in this regard. As FINMA considers cybersecurity to be one of the top seven risks for the Swiss financial market, and given that at least 95 cyberattacks were notified to FINMA between September 2020 and December 2021, FINMA has strengthened its resources in this area to provide adequate support to licensed insurance undertakings.

13 Financial crime

13.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for insurance companies?

The Swiss Criminal Code includes specific provisions that penalise money laundering and other forms of financial crime. The Federal Act on Anti-Money Laundering (SR 955.0) sets out rules that must be complied with in relation to administrative law aspects. The Swiss Financial Market Supervisory Authority monitors insurance undertakings' compliance with their obligations under the Anti-Money Laundering Act to the extent that the insurance undertaking has not opted to participate in the Self-regulated Organisation of the Swiss Insurers Association (SRO-SVV). The SRO-SVV is authorised to issue members with a warning or impose a fine of up to CHF 1 million in the event of non-compliance with the applicable rules.

14 Competition

14.1 What specific challenges or concerns does the insurance sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at insurance companies?

The general principles and rules set forth in the Federal Constitution and federal legislation (eg, the Unfair Competition Act and the Federal Antitrust Act) also apply to the insurance sector and to insurance undertakings. The specificity of the insurance sector does not justify any specific exclusion of insurance law from the application of the basic competition rules.

However, please also see question 10.2.

15 Restructuring and insolvency

15.1 What provisions govern insolvency in your jurisdiction and what specific implications do these have for insurance companies?

If an insurance undertaking's financial conditions deteriorate, the Swiss Financial Market Supervisory Authority (FINMA) will monitor the undertaking and its development specifically. In the event of a risk of insolvency, it will evaluate the prospects of restructuring or initiate bankruptcy proceedings.

In principle, an insurance undertaking can also opt for a solvent winding-down of its operations on a voluntary basis (run-off). Ultimately, if attempts to stabilise the undertaking fail, FINMA may also initiate bankruptcy proceedings.

Under the Insurance Supervision Act (ISA) in force to date, bankruptcy proceedings for insurance undertakings are regulated in a similar way to under the general rules set out in the Federal Debt Collection and Bankruptcy Act. However, FINMA as bankruptcy administrator is granted extensive powers to regulate the proceedings and to issue administrative orders.

The revised ISA will restate the bankruptcy and resolution regime that applies to insurance undertakings by implementing rules which are similar to those applicable to banks. The regime will consist of three stages of intervention by FINMA. If there are reasonable grounds for concern that an insurance undertaking is overindebted or has serious liquidity problems, FINMA may order:

protective measures (eg, deferment and deferral of maturity of claims);
restructuring proceedings; or
the bankruptcy liquidation of the insurance undertaking.

16 Trends and predictions

16.1 How would you describe the current insurance landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

There are two key trends to observe on the Swiss market. First, an amendment to the Insurance Contract Act which entered into force on 1 January 2022 now allows an injured/damaged party to bring a direct claim against the liability insurer of the liable persons. Insurance undertakings that underwrite liability risks should consider their increased exposure to lawsuits instigated against insurers directly by the injured/damaged party.

Second, the Swiss legislature has concluded its revision of the Insurance Supervision Act, which will introduce:

reorganisation measures for insurers;
a customer protection-based supervisory concept, including code of conduct provisions for intermediaries, as well as specific duties of conduct in the realm of qualified life insurance;
a licensing requirement for the branch offices of foreign reinsurers; and
some deregulation of captives.

The insurance market will monitor the application of the revised provisions closely.

17 Tips and traps

17.1 What are your top tips for insurance companies operating in your jurisdiction and what potential sticking points would you highlight?

The regulatory environment for insurance undertakings is becoming increasingly complex. As the Swiss Financial Market Supervisory Authority (FINMA) assumes extended supervisory roles and requirements, insurance undertakings must ensure ongoing compliance with new rules set forth by FINMA, including in areas such as cybersecurity and environmental, social and governance. Against this background, it is recommended that insurance undertakings foster close and transparent relationships with FINMA.

The amendment of the Swiss Insurance Contract Act with a direct claim against liability insurers will further require insurers to monitor recourse claims arising from liabilities more closely and implement sufficient contractual remedies to ensure the insureds' cooperation in the event of insured claims.

Meanwhile, sanctions have become a major topic in all industries, including the insurance sector – particularly in combination with the increase in cyberattacks. Insurance undertakings would be well advised to keep an eye on the applicable sanctions regimes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Switzerland: Insurance Comparative Guide