On January 1, 2024, the revised Insurance Supervision Act (nVAG) will take effect, along with its accompanying implementing regulations.
For companies operating in the insurance sector, the partial revision of the Insurance Supervision Act (VAG) and related ordinances means that they must bring their internal compliance systems into line with the new requirements by the beginning of 2024 and determine which regulatory obligations now apply to them.
Unlike banks, insurance companies do not have an independent right to restructuring under the current Insurance Act (VAG). Finally, Parliament also decided that the conduct requirements of the Financial Services Act (FIDLEG) do not apply directly to insurance companies, but should instead be incorporated directly into the nVAG as part of a partial revision.
A customer categorization system will be introduced based on the protection needs of individual policyholders, along with associated regulatory relief. Insurance companies may benefit from regulatory relief if they have innovative and sustainable business models or serve exclusively professional policyholders. Furthermore, depending on the risks associated with their business and while ensuring the protection of policyholders, insurance companies or insurance intermediaries may be fully or partially exempted from regulatory oversight.
In addition, the provisions governing the sale of insurance are being revised. Accordingly, in line with the FIDLEG, the conduct requirements for insurance intermediaries when selling insurance products of an investment nature will be adjusted. For example, before recommending a qualified life insurance policy (Art. 39j nVAG), an insurance intermediary must verify whether the product is appropriate for the respective policyholder and assess the policyholder’s knowledge and experience. In addition, the insurance intermediary must document which qualified life insurance policy was purchased, what knowledge and experience the policyholder possesses, and that a suitability assessment was conducted (Art. 39k nVAG). An independent insurance intermediary must inform the policyholder about the compensation he receives from third parties for the provision of his services. It is also clarified that an insurance intermediary cannot act simultaneously as both a tied and an independent insurance intermediary (prohibition on dual activity), since an independent insurance intermediary has a duty of loyalty to the insured.
Independent insurance intermediaries—that is, insurance intermediaries who are not affiliated with an insurance company—must register. They may not resume their activities until they have successfully registered (Art. 42, para. 1, nVAG).
Insurance intermediaries must meet certain requirements to register. They must demonstrate sufficient professional qualifications (Art. 184 AVO), meet personal requirements (Art. 185 AVO), and either obtain professional liability insurance or provide equivalent financial security (Art. 186 AVO).
In addition, all insurance intermediaries are now required to undergo training and continuing education.
Current insurance law does not provide for any specific restructuring framework that takes into account the unique characteristics of the insurance business. In the absence of such provisions, the Swiss Financial Market Supervisory Authority (FINMA) can only order “protective measures” if an insurance company encounters financial difficulties and the interests of the insured are thereby jeopardized (see Art. 51 VAG). The proposed legislation aims to establish a legal framework that makes it possible to restructure insurance companies in the event of insolvency, rather than allowing them to go into bankruptcy. The goal is to position the insurance company in such a way that any financial crisis that arises can be overcome and, ultimately, insurance bankruptcy proceedings can be avoided. Establishing the option of restructuring rather than liquidating an insolvent insurance company—provided this helps minimize the damage to policyholders—strengthens customer protection (policyholder protection) without impairing the competitiveness of insurers.
The current VAG is based primarily on a uniform and undifferentiated need for protection among policyholders. This means that, from a regulatory perspective, there is no systematic assessment or distinction between the various protection needs of policyholders (including private individuals, small and medium-sized enterprises, large clients, and primary insurers). Consequently, there is no categorization of regulatory requirements. The distinction regarding the applicability of the protective provisions of the Insurance Supervision Act (VAG) was first introduced with the adoption of the regulation on reinsurance (Art. 35 VAG). Current law therefore distinguishes only between insurers engaged in primary insurance business—which are subject to a higher level of regulation and supervision—and insurers engaged in reinsurance business—which are subject to a lower level of regulation and supervision.
Under the revision, the level of regulation and supervision applied to an insurer should not be determined solely by the purpose of its relevant insurance relationships (primary or reinsurance), but rather by the protection needs of its respective policyholders. To this end, various categories of insured persons are to be defined. This makes it possible to operate primary insurance with a lower level of regulation and supervision, provided that it is concluded exclusively with professional policyholders (such as large corporate clients). If the insurer has exclusively professional policyholders, the provisions regarding the safeguarding of policyholders’ claims (so-called “restricted assets”) do not apply, for example. The rationale behind this new regulation is that professional policyholders are already capable of taking appropriate safeguards on their own. Furthermore, professional policyholders are able to assess their own financial stability and evaluate the details of an insurance contract they intend to enter into.
To better meet the protection needs of policyholders, the new regulations now impose stricter requirements on insurance brokerage and insurance brokers, including certain ethical obligations modeled after those set forth in the FIDLEG.
The amendment to the Insurance Supervision Act (VAG) has now been finalized. Consequently, all insurance intermediaries must henceforth undergo industry-specific training as part of their initial and continuing education. The following points should be taken into account:
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