Partial Revision of the Swiss Insurance Supervision Act is Drawing Closer
The partial revision of the Swiss Insurance Supervision Act (ISA) is drawing closer: On Monday, December 13, 2021, the Swiss Council of States (Ständerat) addressed the partial revision of the ISA as second legislative chamber. For the most part the Council of States confirmed the decisions taken by the National Council (Nationalrat). It has however proposed a few key changes.
On December 13, 2021, the Swiss Council of States (Ständerat) addressed the partial revision of the Swiss Insurance Supervision Act (ISA) as second legislative chamber. As put forth by its Economic Affairs and Taxation Committee, the Council of States largely confirmed the decisions taken by the National Council (Nationalrat) on May 3, 2021.
Specifically, we would like to point out the Council of States’ consent to making insurance special purpose vehicles subject to prudential supervision by the Swiss Financial Market Supervisory Authority FINMA (FINMA) (art. 2 para. 1 lit. e E-ISA) and to expand the possibilities for insurance companies to engage in non-insurance business without FINMA approval (art. 11 E-ISA).
The Council of States has however proposed a few significant changes. Deviations from the National Council’s decision pertain to the following topics:
- Confirmation of the approach proposed by the Federal Council, whereby international capital standards may allow for amendments to the Swiss Solvency Test (SST), but not replace its application entirely (art. 9c E-ISA);
- Broadening of the defintion of professional policyholders to include large companies as defined in art. 98a para. 2 lit. g of the Insurance Contract Act (Versicherungsvertragsgesetz; in its version coming into force on January 1, 2022);
- Inclusion of provisions on the legal relationship between insurance special purpose vehicles and their compartments («risk groups») (art. 30f E-ISA);
- Deletion of the possibility for insurance undertakings to collectively negotiate with service providers and conclude tariff agreements in the area of supplementary social health, as was proposed by the National Council (art. 31b E-ISA);
- Re-introduction of the obligation for unaffiliated insurance intermediaries to join an ombudsman office, as was deleted by the National Council (art. 41 para. 1 lit. e E-ISA);
- Exclusion of certain risk-absorbing capital instruments when determining whether an insurance company is overindebted (art. 51a para. 2bis E-ISA);
- Consistent approach to the treatment of risk-absorbing capital instruments (tier 2 instruments) in a reorganisation or bankruptcy scenario (art. 54ter E-ISA);
- Differentiation between contractual bail-in instruments (Art. 52d para. 3 lit. b E-ISA) and statutory bail-in (Art. 52d para. 4 lit. a E-ISA) with respect to conversion into equity or reduction of claims in the event of a reorganization.
As a next step, the National Council will review these deviations with the aim of resolving any remaining differences. The procedure for the resolution of differences could potentially conclude when parliament meets in spring 2022. Despite it being unclear at this stage when the partially revised ISA will enter into force, we currently do not expect this to happen before January 1, 2023.
The Council documents on which the Council of States’ deliberations were based are available here (only available in German, French and Italian).
For further information on the changes in insurance as a result of the partial amendment of the ISA, we kindly refer to our Push dated October 21, 2020 and the statement submitted by Homburger AG as response to the consultation draft:
We are available to address any questions you may have in this respect.
This Homburger Bulletin expresses general views of the authors at the date of the Bulletin, without considering the facts and circumstances of any particular person or transaction. It does not constitute legal advice. This Bulletin may not be relied upon by any person for any purpose, and any liability for the accuracy, correctness or fairness of the contents of this Homburger Bulletin is explicitly excluded.