Insurance & Reinsurance 2021 – Insurance

Bizar Male

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1.1 Sources of Insurance and Reinsurance Law

The Swiss legal framework for private insurance is based in
particular on the laws and regulations set out below.

Federal Regulations

The Federal Insurance Contract Act (ICA) and, subsidiarily, the
Swiss Code of Obligations (CO) govern the contractual relationship
between insurer, policyholder and insured (Article 100 paragraph 1
ICA). The ICA applies to direct insurance contracts underwritten by
insurance undertakings subject to supervision by the Swiss
Financial Market Supervisory Authority FINMA (FINMA; Article 101
paragraph 1 No 2 e contrario ICA). Reinsurance contracts are
outside the scope of the ICA and are consequently only subject to
the general contract law provisions of the CO (Article 101
paragraph 1 No 1 ICA; see 6.6 Consumer Contacts or
Reinsurance Contracts
). The partial revision was adopted
by Swiss parliament in summer 2020 (revICA; see 12 Recent and
Forthcoming Legal Developments). The partially revised ICA will
enter into force on 1 January 2022.

The Federal Insurance Supervision Act (ISA) sets out the
regulatory requirements for insurance and reinsurance undertakings
and insurance intermediaries (see 2 Regulation of Insurance
and Reinsurance
). On 21 October 2020, the Swiss Federal
Council issued a dispatch along with a revised draft (Draft revISA)
for deliberation in Swiss parliament (see 13 Other
Developments in Insurance Law
). The partial revision of
the ISA might enter into force in 2022/2023 at the earliest.

Supplemental Ordinances

The ISA is supplemented by the following implementing

  • the Federal Ordinance on the Supervision of Private
    Insurance Companies (ISO);

  • the FINMA-Ordinance on the Supervision of Private
    Insurance Companies (ISO-FINMA); and

  • the FINMA-Ordinance on Insurance Bankruptcy.

Other Provisions

In addition to the core insurance laws and ordinances listed
above, other bodies of law contain relevant provisions with regard
to insurance and reinsurance, (eg, general consumer protection law,
data protection law or the law against unfair competition).
Furthermore, Switzerland is a party to three international treaties
on direct insurance that supersede the ISA (see 3.1
Overseas-Based Insurers or Reinsurers

  • the Agreement of 10 October 1989 between the Swiss
    Confederation and the European Economic Community (now the EU) on
    Direct Insurance other than Life Insurance (EU Direct Insurance

  • the Agreement of 19 December 1996 between the Swiss
    Confederation and the Principality of Liechtenstein on Direct
    Insurance and Insurance Intermediaries (Liechtenstein Direct
    Insurance Treaty) that is supplemented by the agreement of 10 July
    2015 on insurance against natural disasters by private insurance
    undertakings; and

  • the Agreement of 25 January 2019 between the Swiss
    Confederation and the UK on Direct Insurance other than Life
    Insurance (UK Direct Insurance Treaty) (to enter into force once
    the EU Direct Insurance Treaty ceases to apply to the UK).

FINMA further specifies matters of insurance regulation in
numerous circulars (not binding for Swiss courts; however, the
courts in Switzerland often take the circulars into account when
interpreting the laws and ordinances). In addition, FINMA publishes
less formal guidance documents and FAQs on supervisory matters.

Switzerland is a civil law country, however, precedent cases of
Swiss courts still play an important role in interpreting and
developing the statutory law (Article 1 paragraph 2 Swiss Civil


2.1 Insurance and Reinsurance Regulatory Bodies and Legislative


Swiss insurance supervisory law is codified in the ISA and its
implementing ordinances (see 1.1 Sources of Insurance and
Reinsurance Law
), FINMA being the overall competent
licensing and supervisory authority. In general, the ISA applies

  • Swiss-domiciled insurance and reinsurance

  • foreign-domiciled insurance undertakings engaging in
    insurance business in or from Switzerland (see 3.1 Overseas-Based
    Insurers and Reinsurers);

  • insurance intermediaries (see 5
    ); and

  • insurance groups and insurance conglomerates (see
    2.2 The Writing of Insurance and Reinsurance;
    Article 2 paragraph 1 litterae a–d ISA).


Certain specific types of activities and undertakings are
exempted from the scope of application of the ISA, namely (Article
2 paragraph 2 ISA):

  • insurance undertakings domiciled abroad that only
    engage in reinsurance activities in Switzerland (see 3.1
    Overseas-Based Insurers or Reinsurers

  • public insurance undertakings;

  • private insurance undertakings that are regulated by
    special federal legislation;

  • certain insurance co-operatives

Other regulatory bodies exist – eg, in the area of
mandatory health insurance (the Federal Office of Public Health),
pension schemes (the Federal Occupational Pension Supervisory
Commission) or certain cantonal building insurances (supervisory
authority of the relevant Swiss canton).

2.2 The Writing of Insurance and Reinsurance

Insurance and reinsurance undertakings that are within the scope
of application of the ISA must obtain an insurance licence from
FINMA before engaging in any regulated activities – ie,
writing insurance and reinsurance business (Article 3 paragraph 1
ISA). The main licence requirements are set out below.

Organisational Requirements

  • Legal form as a company limited by shares
    (Aktiengesellschaft) or a co-operative
    (Genossenschaft; Article 7 ISA).

  • Good standing and assurance of proper business
    conduct by the persons responsible for direction, supervision,
    control and management of the insurance undertaking (Article 14
    ISA; Article 12 et seq ISO).

  • Organisational structure allowing the recognition,
    limitation and monitoring of all significant risks (Article 22 ISA;
    Articles 96 to 98a ISO; FINMA-Circular 2017/2 Corporate Governance
    – Insurers).

  • Appointment of a responsible actuary who has access
    to all business records (Article 23 ISA).

  • Effective internal control system and an internal
    audit function which is independent from management (Article 27

  • Appointment of a licenced audit firm to review the
    conduct of business (Article 28 ISA).

Financial Requirements

  • Minimum capital between CHF3 million and CHF20
    million (Article 8 ISA; Articles 6 to 10 ISO).

  • Sufficient solvency margin (Swiss Solvency Test
    (SST); Article 9 ISA and Articles 21 to 53a ISO).

  • Maintenance of an organisational fund
    (Organisationsfonds) (Article 10 ISA; Article 11

  • Sufficient insurance-related reserves
    (versicherungstechnische Rückstellungen) for all
    business activities (Article 16 ISA; Article 54 et seq ISO).

  • Claims based on insurance contracts have to be
    covered at all times by tied assets (gebundenes
    ; Article 17 et seq ISA; Article 1

  • Maintenance of sufficient liquidity in order to be
    able to satisfy all of its payment obligations, even in stress
    scenarios (Article 98a ISO).

Other Requirements

Building on the basic regulatory requirements, certain
additional requirements or reliefs apply depending on the specifics
of the case or the business. These include:

  • additional provisions (eg, regarding the scope of
    admissible activities or the preventive control of insurance
    tariffs) apply to specific classes and types of insurance only
    (Article 31 et seq ISA; Article 120 et seq ISO);

  • additional requirements apply for foreign insurance
    undertakings (Article 15 ISA; see 3.1 Overseas-Based
    Insurers or Reinsurers
    ); and

  • companies, engaging in reinsurance business only, are
    exempt from certain regulatory requirements under the ISA, inter
    alia from the requirement to maintain tied assets

Special provisions apply to the consolidated supervision of
insurance groups, and insurance conglomerates (Articles 64 et seq
and 72 et seq ISA; FINMA-Circular 2016/4 Insurance Groups and
Conglomerates). FINMA may impose consolidated supervision on an
insurance group or insurance conglomerate under certain conditions
(Articles 65 and 73 ISA). Consolidated group supervision applies in
addition to FINMA’s individual supervision over the Swiss
insurance undertakings (or other regulated Swiss entities; Articles
66 and 74 ISA).

2.3 The Taxation of Premium

Insurance premium payments are subject to stamp taxes if:

  • the policy is part of a Swiss portfolio of an
    insurance undertaking subject to Swiss insurance supervision or of
    a Swiss insurance undertaking enjoying public law status; or

  • a Swiss policyholder concluded the policy with a
    foreign insurance undertaking not subject to Swiss insurance
    supervision (Article 21 Federal Stamp Tax Act (STA)).

Several types of insurance are exempt from this tax, including,
in particular, premiums on reinsurance policies (Article 22 STA).
In principle, the stamp tax amounts to 5% of the cash premium, with
the exception of life insurance policies, where it amounts to 2.5%
(Article 24 STA).

Meanwhile, insurance and reinsurance turnovers are exempt from
Swiss VAT (Article 21 paragraph 2 No 18 Value Added Tax Act).


3.1 Overseas-Based Insurers or Reinsurers


Insurance undertakings with registered seat abroad engaging in
insurance activities in or from Switzerland fall within the scope
of the ISA (see 2.1 Insurance and Reinsurance Regulatory
Bodies and Legislative Guidance
), unless an international
treaty provides otherwise (see below) or an exemption under the ISA
applies (eg, foreign insurance undertakings engaging only in
reinsurance activities in Switzerland (Article 2 paragraph 2
littera a ISA), regardless if conducted cross-border or through a
Swiss branch office; foreign insurance undertakings that have not
established a branch office in Switzerland if their insurance
activity in Switzerland exclusively covers (i) insurance risks in
connection with ocean shipping, aviation and cross-border
transports; (ii) risks located abroad; and/or (iii) war risks
(Article 1 paragraph 2 ISO); de minimis exemption (Article 2
paragraph 3 ISA), however, rarely applies. In the Draft revISA, a
new exemption for innovative business models has been proposed (see
13 Other Developments in Insurance Law).

An insurance activity is deemed to take place in Switzerland,
irrespective of the place and circumstances of the conclusion of
the contract, if:

  • the policyholder or the insured is a natural person
    or a legal entity domiciled in Switzerland; or

  • the insured goods are located in Switzerland (Article
    1 paragraph 1 ISO).

Foreign insurance undertakings that fall within the scope of the
ISA are required to obtain a licence from FINMA prior to taking up
insurance activities in or out of Switzerland (Article 3 paragraph
1 ISA) and are subject to ongoing supervision by FINMA (Article 2
paragraph 1 littera b ISA; Article 3 littera a Federal Act on the
Swiss Financial Market Supervisory Authority). Compared to a
Swiss-domiciled insurance undertaking (see 2.1 Insurance
and Reinsurance Regulatory Bodies and Legislative
), a foreign insurance undertaking seeking to
obtain a licence to be active in or from Switzerland has to fulfil
additional regulatory requirements (subject to differing rules in
international treaties; Article 15 paragraph 2 ISA). It is, in
particular, required to establish a branch in Switzerland and
appoint a general agent (Generalbevollmächtigter) for
that branch (Article 15 paragraph 1 littera b ISA). The general
agent has to be a Swiss resident and have the knowledge necessary
to operate in the insurance business (Article 16 ISO). Furthermore,
the foreign insurance undertaking has to comply with the additional
licence requirements (see Article 15 ISA).

International Treaties

The EU Direct Insurance Treaty (Agreement of 10 October 1989)
facilitates the access of EU insurance companies to the Swiss
market. While it does not exempt them from a Swiss licence
requirement in connection with the establishment of a Swiss
insurance branch, relief is granted.

Under the Liechtenstein Direct Insurance Treaty (Agreement of 19
December 1996 ), insurance undertakings domiciled in Liechtenstein
may engage in direct insurance business in Switzerland either on a
pure cross border basis or through a Swiss branch office without
requiring a FINMA licence.


From the perspective of the EU Direct Insurance Treaty, the UK
will – upon a potential Brexit – be deemed a third
country. Switzerland and the UK concluded the UK Direct Insurance
Treaty (Agreement of 25 January 2019) that guarantees freedom of
establishment for insurance undertakings operating in the field of
direct insurance by converting the content of the EU Direct
Insurance Treaty to apply to the bilateral relationship between
Switzerland and the UK post-Brexit. There are two scenarios for the
entry into force of the UK Direct Insurance Treaty:

Deal scenario

If the treaty between the EU and the UK provides for a temporary
continuation of certain EU third country treaties towards the UK,
including the EU Direct Insurance Treaty, the EU Direct Insurance
Treaty would remain applicable between Switzerland and the UK until
the end of the relevant transitional period. This would, however,
be formalised by way of a reciprocal notification between the EU
and Switzerland. After the expiry of the transitional period, the
UK Direct Insurance Treaty between Switzerland and UK would enter
into force.

Hard Brexit/no-deal scenario

The UK Direct Insurance Treaty would enter into force on the day
the UK formally leaves the EU in the event of “No

3.2 Fronting

In Switzerland, fronting is, in principle, permitted. Swiss law
does not provide for a specific retention obligation on the part of
the cedent in fronting arrangements.


4.1 M&A Activities Relating to Insurance Companies

In recent years, transaction activity in Switzerland has been
noticeably high. In particular, in the context of preparing
themselves for Brexit, several insurance groups have restructured,
consolidated and realigned their group operations. Further, a
number of private equity investors have become very active buyers
of insurance and reinsurance undertakings, including in particular
businesses in run-off (and such buyers have become increasingly
accepted by FINMA as qualified or controlling investors in
insurance undertakings). Moreover, a certain consolidation in the
Swiss insurance brokerage industry can be observed.


5.1 Distribution of Insurance and Reinsurance Products


In Switzerland, insurance and reinsurance products may be
distributed directly (ie, by the insurance and reinsurance
undertakings themselves) or through insurance intermediaries.
Insurance intermediaries in the meaning of the law are persons who
offer or conclude insurance contracts in the interest of insurance
undertakings or other persons (Article 40 ISA). The law furthermore
distinguishes between so-called tied and untied insurance
intermediaries (regarding the distinction between brokers and
agents see 6.3 Intermediary Involvement in an Insurance


Untied insurance intermediaries are insurance intermediaries
that are neither legally, nor economically, nor in any other way
tied to an insurance undertaking (obligation to register in the
public register of insurance intermediaries maintained by FINMA).
Tied insurance intermediaries are those that are, in a relevant
manner, legally or economically tied to an insurance undertaking
(they can, but are not obliged to register in the public register)
(Article 43 ISA).

For an intermediary to be eligible for registration in the FINMA
register, certain requirements must be fulfilled, including the
demonstrable capacity to act (Handlungsfähigkeit),
proof of appropriate professional qualifications and professional
indemnity insurance (Article 44 ISA in conjunction with Article 184
ISO). In addition, insurance intermediaries (both tied and untied)
are subject to information duties vis-à-vis the insured (see
6.1 Obligations of the Insured and Insurer).

Registered insurance intermediaries are not subject to ongoing
prudential supervision by FINMA, but FINMA may examine them from
time to time to verify their compliance with regulatory
requirements. Furthermore, in case of any indication of
irregularities, FINMA may take enforcement action.

Any intermediary activities in Switzerland for the benefit of
insurance undertakings that fall within the scope of the ISA, but
are not licensed by FINMA to carry out insurance activities in or
from Switzerland are prohibited (Article 41 ISA).


6.1 Obligations of the Insured and Insurer

When concluding an insurance contract, the policyholder has a
duty of disclosure which is limited in its content and scope by the
written questions provided by the insurer (Article 4 paragraph 1
ICA). The insurer has to proactively seek information as the
policyholder need not disclose any facts which the insurer has not
asked about. The policyholder must answer the questions and in this
context inform the insurer in writing of all facts relevant to the
assessment of the risk, to the extent and as they are known or
should have been known to them when the contract was concluded.
Facts are considered relevant for the risk assessment if they may
potentially influence the insurer’s decision to conclude the
contract at all or on the agreed terms (Article 4 paragraph 2

An insurer must inform the policyholder, prior to conclusion of
the contract, of:

  • the identity of the insurer; and

  • the main content of the insurance contract (Article 3
    paragraph 1 ICA).

It may delegate its information obligations (eg, to an insurance
intermediary). However, in relation to third parties (including the
policyholder) the insurer remains solely responsible for the
performance of the information obligation as Article 3 ICA is
mandatory and cannot be contractually modified to the disadvantage
of the policyholder (Article 98 paragraph 1 ICA).

Furthermore, information duties apply to insurance
intermediaries who must provide their clients with information on,
for example, the intermediary’s identity and address, its
contractual relationships with the insurance undertakings on whose
behalf it acts and the names of these insurance undertakings on a
durable medium before taking up any intermediation activity
(Article 45 ISA).

6.2 Failure to Comply with Obligations of an Insurance

If the policyholder breaches its information duty pursuant to
Article 4 ICA and misinforms or fails to inform the insurer of a
material risk factor, the insurer may terminate the contract by
written notice within four weeks after it becomes aware of the
breach of the information duty (Article 6 ICA). The contract is
terminated retroactively, and the insurer is not liable to pay any
benefits under the insurance contract and may reclaim insurance
benefits already paid together with default interest of 5%. Despite
of a breach of the duty of disclosure by the policyholder, an
insurer may not terminate the contract in circumstances described
in Article 8 ICA – eg, if the insurer knew or should have
known the incorrect or concealed fact or concluded the contract
even though the policyholder did not answer a question (Article 8

If the insurer fails to comply with its information duty
pursuant to Article 3 ICA, the policyholder has the right to
terminate the insurance contract by written notice (Article 3a
ICA). This right of termination expires four weeks after the
policyholder becomes aware of the breach of duty, but no later than
one year after the breach of duty.

The information duties of the insurance intermediary are
supervisory duties and their breach may expose the insurance
intermediary to administrative and criminal sanctions, including
punishment with a fine of up to CHF500,000 if the breach is
committed intentionally, and up to CHF150,000 if committed
negligently (Article 86 ISA). Furthermore, this breach may also
result in civil liability for the intermediary.

6.3 Intermediary Involvement in an Insurance Contract

An insurance intermediary is either a tied intermediary or an
untied intermediary (see 5 Distribution). In an
untechnical sense, tied insurance intermediaries are often referred
to as insurance agents and untied insurance intermediaries are
often referred to as insurance brokers, indicating the typical
set-up of the contractual relationship between the insurance
intermediaries, the insurance undertakings and/or the
policyholders. However, the contractual qualification pursuant to
Swiss private law does not always correspond with the qualification
pursuant to Swiss insurance supervisory law.

An insurance agent has a dominant contractual relationship with
an insurance undertaking and primarily acts in its interest and/or
on its behalf. The knowledge of the insurance agent is, in
principle, attributed to the insurance undertaking (Article 34
ICA). The insurance undertaking pays the insurance agent the
remuneration agreed in their contract.

An insurance broker is typically in a contractual relationship
with both the insurance undertaking and the policyholder but acts
primarily in the interest and/or on behalf of the policyholder, to
whom it owes diligent advice on suitable insurance from an adequate
spectrum of available products. The knowledge of an insurance
broker is, in principle, attributed to the policyholder. However,
the broker’s remuneration/commission is typically paid by the
insurance undertaking with which the policy is ultimately

The commission is typically priced into the insurance premiums
the insured pays to the insurance undertaking. Consequently, from
an economic perspective, it is the insured that ultimately pays the
insurance broker. This regularly entails potential conflicts of
interest which must be adequately mitigated by the broker; in this
regard, the Draft revISA provides for new measures (Article 45a and
45b Draft revISA; see 13.1 Additional Market

6.4 Legal Requirements and Distinguishing Features of an
Insurance Contract

Elements of an Insurance Contract

There is no specific statutory definition of the term insurance
or contract of insurance. Based on precedent cases of the Swiss
Federal Supreme Court, the following five elements characterise an
insurance contract.

  • Risk transfer – the insured person must have an
    interest which they protect against a certain risk through the
    economic performance of the insurers.

  • Payment of a premium – the premium is, in
    principle, the price the insured (or the policyholder) pays in
    exchange for the performance by the insurer in the event that the
    insured risk materialises.

  • Performance by the insurer/cover – the insurer
    must be under an obligation to perform to the insured or another
    beneficiary if the insured risk materialises.

  • Independence of the operation – the insurance
    contract refers to an independent operation that is not an
    ancillary agreement or a mere feature or term of a non-insurance
    contract (eg, a warranty for a purchased good is usually not an

  • Compensation of risks according to the laws of
    statistics (Systematic Business Activity)

The first three elements are generally considered to be the
defining and essential elements of an insurance contract
(essentialia negotii), while the last two are particularly relevant
from a supervisory law perspective.

Form Requirements

The insurance contract, in principle, need not comply with any
particular form requirements to be valid, with some exceptions (eg,
a third person whose life is covered under the life insurance has
to agree to the insurance in writing before the insurance contract
is concluded (Article 74 paragraph 1 ICA)). Nevertheless, the
application for an insurance policy and acceptance by the insurer
are usually in writing. In addition, the insurer must issue a
policy to the insured stating the rights and duties of the parties
(Article 11 ICA) and on the insured’s request and against
reimbursement, the insurer must provide a copy or transcript of the
insured’s statements in the application, which were determining
for the conclusion of the insurance contract (Article 11 paragraph
2 ICA).

Mandatory Provisions

A number of mandatory provisions (and provisions that are
mandatory for the insurer only) in the ICA limit the freedom of
content for insurance contracts (see Article 97 and 98 ICA).
Furthermore, insurance-specific grounds for nullity (eg, the
prohibition of retroactive insurance) (Article 9 ICA; will be
changed in the context of the revised revICA, Article 10 revICA),
as well as general restrictions on the freedom of content (eg,
Article 20 CO) apply.

6.5 Multiple Insured or Potential Beneficiaries

Collective Insurance Contract

A collective insurance contract is generally described as a
legally uniform contract that insures several persons or several
independent objects (Article 3 paragraphs 3 and Articles 7, 31 and
87 ICA). It might be an indication of the existence of a collective
insurance contract if – eg, the insured is not identical with
the policyholder.

In principle, the same rules as for individual insurance
contracts apply. However, there are certain provisions in the law
that are specific to collective insurance, inter alia the

Information duties

If the collective insurance contract grants a direct entitlement
to benefits to persons other than the policyholder, the
policyholder is under an obligation to inform the insured

  • the essential content of the agreement (needs to be
    determined on a case-by-case basis and is not identical with
    Article 3 paragraph 1 ICA);

  • any amendments; and

  • its termination, whereby the insurer has to provide
    the necessary information (Article 3 paragraph 3 ICA).

Breach of the information duty

If the information duty of the policyholder is only breached in
respect of a part of the insured objects or persons, the insurance
remains effective for the remaining part, provided that the insurer
would have insured this part alone under the same conditions
(Article 7 ICA).

Requirements for entering into the insurance

Some legal authors suggest that the requirement that the person
whose life is covered by the life insurance has to agree in writing
(Article 74 paragraph 1 ICA), is limited to individual life
insurance and does not extend to collective life insurance.

Insurance for the Benefit of Third Parties

A policyholder may, in principle, appoint a third party as
beneficiary without the consent of the insurance undertaking
(Article 76 paragraph 1 ICA). Even if a third party is appointed as
beneficiary, the policyholder may freely dispose of the
entitlement; the right to revoke the appointment of the beneficiary
only lapses if the policyholder has signed a written waiver of
revocation in the policy and has handed the policy over to the
beneficiary (Article 77 ICA). Unless the policyholder disposes
otherwise, the beneficiary obtains a separate claim against the
insurance undertaking (Article 78 ICA). There are also specific
provisions on the attachment of an insurance claim and the opening
of bankruptcy proceedings and for the interpretation of beneficiary
clauses (Articles 79 et seq ICA).

6.6 Consumer Contracts or Reinsurance Contracts

Insurance contracts (including consumer contracts) are generally
subject to the provisions of the ICA, eg, information duties of
insurers and mandatory and semi-mandatory provisions that limit the
contractual freedom of insurance undertakings (see 6.1
Obligations of the Insured and Insurer
and 6.2
Failure to Comply with Obligations of an Insurance

Reinsurance contracts are excluded from the scope of the ICA
(Article 101 ICA). In Switzerland, as in many other countries,
there is no specific and distinct reinsurance contract law.
Reinsurance contracts are governed by the general provisions of the
CO and by generally (and often internationally) recognised
reinsurance customs and standards.

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Originally published by Chambers Global Practice Guide -
Insurance & Reinsurance 2021, Chambers and Partners, London

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.

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