Insurers in good shape despite record losses
Although natural catastrophes caused record losses for private Swiss insurers, 2005 was on the whole a satisfactory year for the industry. Insurers were able to further improve the underlying business and shore up their equity bases. Premium growth of just under three percent in indemnity insurance was offset by a six-percent decline in life premiums.
Zurich, 25 January 2006 – Private Swiss insurers are in good shape. Their ability to deal with record losses caused by major storms in August 2005 is testimony to their financial strength and economic significance. Despite a challenging political and regulatory environment coupled with low interest rates, the upward trend in industry results continued. Underwriting discipline and continued strict cost management provided further efficiency gains and generated notably better underwriting results for numerous companies. The Swiss Insurance Association (SIA) expects to see good to very good results when insurers present their 2005 figures over the coming months.
According to SIA estimates, premium volume for indemnity insurance rose by 2.7% in 2005. Some lines of business, such as motor insurance, were forced to correct premium levels upwards on the back of increasing claims. The figures for life business were mixed: whilst individual life insurance posted growth of 1.3%, group insurance (company pensions) declined by 8.4% compared to the previous year.
Ensuring that company pension schemes are sustainable in the long-term will require further structural changes. The current phenomenon of covert redistribution from the working population to pensioners has to end. This calls for prompt adjustment of the conversion rate. The minimum rate of interest also needs to be revised. Furthermore, the plethora of legal requirements imposed on occupational pension fund managers is stymying competition. Realistic parameters and less red tape are necessary to win back the confidence of insureds.
Liberalisation of accident insurance
Private insurers account for more than 70% of compulsory occupational accident insurance business. The SIA therefore attaches great importance to the planned overhaul of the Accident Insurance Statute. It is essential that the liberalisation of accident insurance, which began with the lifting of joint pricing arrangements, continues so that a real competitive environment can be created. The SIA further advocates a clear statutory ruling on the future role of Suva (Swiss Accident Insurance Fund).
The outlook for 2006 in the domestic market is good. Two areas of focus will be the need for action in company pensions and a review of current natural peril insurance models, which may need to be developed further. One core element of this will be the provision of cover against earthquake losses. The sector will also be busy implementing the revisions to the Insurance Supervisory Act (VAG) and attendant solvency regulations, as well as the amendments to the Insurance Contract Act (VVG). In addition, the SIA and its member companies shall be examining in more detail the issue of rising bodily injury claims.
Links (in German)
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