The in­sur­ance in­dus­try – a growth leader in the Swiss econ­o­my

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The insurance sector is among the most productive industries in Switzerland. It not only weathered the recent financial crisis very well, but is set to post above-average growth in future. These are the conclusions drawn by a study carried out by the independent research institute BAKBASEL that was presented today. Regulatory developments constitute one of the key challenges facing the industry.

Zurich, 20 June 2013 – The recent history of the insurance industry has been marked by radical structural change. Liberalisation, the increasing deployment of technology and a renewed focus on core business after the excursion into bancassurance have all resulted in notable efficiency and productivity gains over the last ten years. Thanks to this structural transformation, the industry survived the financial crisis of 2008 particularly well, even exerting a stabilising influence on the Swiss financial industry as a whole. These are the conclusions of the «Location study for the Swiss Insurance Industry» carried out by BAKBASEL, an independent research institute, on behalf of the Swiss Insurance Association SIA. «Today, the insurance industry is one of the strongest sectors of the Swiss economy in terms of growth, whereas other providers of financial services are only now initiating a similar structural transformation,» explains Rebekka Rufer, head of the project group at BAKBASEL that compiled the study.

«The results of this study are very illuminating for the insurance industry. It was one of our aims to gain more information on the current state and the past development of the insurance industry in Switzerland as well as on its future prospects,» says Urs Berger, Chairman of the SIA, on the industry's interest in commissioning a comprehensive location analysis.

High value added in one of the largest insurance markets worldwide

With a workforce of some 60,000, the Swiss insurance industry, including pension funds, generates gross value added of almost CHF 20 billion, or the equivalent of around four per cent of the entire gross value added in Switzerland. What is more, Switzerland is one of the biggest insurance markets globally – in no other country is the insurance density so high. Year for year, private insurers pay out around CHF 43 billion in insurance benefits and manage more than CHF 560 million in assets, a figure equivalent to Switzerland's entire annual GDP. In the coming years, BAKBASEL expects the insurance industry to continue posting above-average annual growth of two per cent in gross value added – slightly higher than the economy as a whole. According to Rebekka Rufer, the rate of growth in jobs in the insurance industry is likely to be just under one per cent.

Moreover, the insurance industry plays an important role in overall economic growth and social progress. As investors, insurers supply the economy and the state with capital, helping society to accumulate wealth, which in turn drives economic growth. By taking on risks from entrepreneurs, insurers unlock capacity that has a direct positive impact on economic innovation. As taxpayers, they contribute around CHF 1.2 billion every year to the public finances at the federal, cantonal and local level.

Regulatory changes pose major challenges

According to the BAKBASEL study, the insurance industry faces a number of big challenges in the years ahead. These include the low interest rate environment, an impending shortage of qualified staff, the ongoing deployment of technology as well as socio-demographic trends. The Swiss insurance industry is well placed to tackle these challenges – not least because of the good framework conditions prevailing in Switzerland.

At the present time, however, uncertainty regarding regulatory changes constitutes one of the main challenges facing the industry, and there is concern among insurers about the trend towards ever more regulation. The fact, for instance, that the Swiss solvency test (SST) tends to be stricter than other regimes could place Swiss insurers at a disadvantage against the international competition. What is more, the interplay between the SST and investment guidelines means there is a danger that Swiss insurers will all be compelled to pursue similar investment strategies, which could give rise to systemic risks. Lucius Dürr, CEO of the Swiss Insurance Association SIA, has this to say about these challenges: «The high level of gross value added by insurers and the very function of insurance itself constitute significant benefits for society. The many projects aimed at regulating the industry – some of which are excessive – must not be allowed to jeopardise the pulling power and the stability of the insurance sector. That would have serious consequences – ultimately for the entire economy.»