Insurance Comparative Guide – – Switzerland

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?

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.

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.