Insurance industry successfully holds its own

Zurich, 20 January 2010 – 2009 presented the private insurance industry with a challenging environment marked by the effects of the financial market and economic crisis as a whole. But thanks to their tried-and-tested business model, private insurers continued to stand strong in the face of the crisis. Premiums in individual segments were down slightly, but the solid operational core business of the industry as a whole promises good technical results. Thanks to positive development on the capital markets, insurers are set to report higher capital gains than in 2008. This will also have a positive effect on their profit and loss accounts.

Slight growth in non-life insurance

Market saturation and the attendant intensification of competition characterise the non-life insurance market in Switzerland. Premiums rose by 0.7% in 2009 across all companies and business lines. According to our projections, premium volume in motor vehicle insurance fell slightly by 0.4%. Competitive pressure increased in this line of business in particular. In contrast, fire, natural perils and other property insurance lines reported growth of 1%, which can be attributed to the increase in insured values.

Consequences of the financial market crisis cause group life insurance premiums to fall

Premium growth in Swiss group and individual life insurance business suffered over the past year from the effects of the crisis on the financial markets and the economy. According to our projections, premiums fell by 2.6%. The main cause of this was developments in group life insurance, where premiums fell by 3.5%. The absence of wage increases and less new business were the primary factors behind the reduction in premiums. The high number of pension institutions which were underfunded in 2009 practically brought to a standstill any competition between (partially) autonomous pension funds and fully financed collective foundations set up by life insurers. With regard to occupational pension provision, SME clients in particular welcomed full insurance solutions with their comprehensive guarantees. Companies affiliated to an underfunded pension fund would have had to fully fund their pension plan or start again at a lower level if they wanted to switch to a life insurer’s collective foundation – which made it much harder to complete a switch due to the difficult economic situation.

Continuing trend towards unit-linked individual life insurance with periodic premiums

Individual life business reported slight growth of 0.3% over the previous year, which is a good result in view of low capital market interest rates. Particularly during periods when interest rates are low, stamp duty shows its devastating effects, which is why the SIA has been campaigning for years to have stamp duty abolished. The trend towards unit-linked individual life insurance with periodic premiums continues, with premiums up by 4.6%. Clients in this segment have the choice between a wide range of products geared toward their individual risk tolerance and risk capacity.

Rapid reduction required in BVG minimum conversion rate

The legal conditions surrounding occupational pensions remain a topic of ongoing importance to the SIA in 2010. On 7 March voters will decide on the measured amendment of the BVG minimum conversion rate in the second pillar. For Erich Walser, Chairman of the SIA, it is clear: «Rising life expectancies and falling gains on the capital markets require a rapid reduction of the conversion rate. The current cross-subsidising of retirement pensions at the expense of the workforce is unsystematic and endangers the financial security of pension funds over the long term.»

Important domestic and international legal reforms

The industry is busy with a whole range of other legal projects. One draft bill of central impor-tance to the insurance industry is the hundred-year revision of the Insurance Contracts Act (VVG). The future structure of the VVG is of key importance for the insurance industry as it regulates the contractual relationship between the insurer and client and influences the design of the insurer's products. The SIA is generally positive with regard to the modernisation of the VVG. However, from the private insurance point of view there are some individual issues of the draft revision and concepts that need to be reviewed. The SIA’s proposals may be downloaded at www.svv.ch/vvg.

The National Council is likely to be considering the revision of the Accident Insurance Act in the summer. The SIA is committed to a modern, liberalised social insurance system and is campaigning for a clear divide between the remit of private accident insurers and SUVA. The SIA also rejects the expansion aspirations of the partial monopolist as unjustified, as these would impede fair competition and infringe on the economic freedoms anchored in the constitution.

At the international level, the SIA has decided to keep a constant focus on the European Solvency II directive and to follow its development critically. The SIA is striving for the recognition of the equality of supervision between the EU and Switzerland. Swiss insurance groups would then be subject to only one supervisory authority – FINMA – in the EU and in Switzerland. The SIA is seeking equivalence in the areas of group solvency, reinsurance and group supervision.
 

Links

• Speech by Erich Walser: «The Swiss insurance industry successfully holds it ground»
• Speech by Lucius Dürr (in German): «Ein stabiler Finanzplatz durch eine starke Versicherungswirtschaft»
• Speech by Bruno Pfister (in German): «JA zur Anpassung des BVG-Mindestumwandlungssatzes auf 6,4%»
• Speech by Christa Markwalder (in German): «Sichere Renten dank tieferem Umwandlungssatz»