Switzerland is among the 20 largest insurance markets in the world. In no other country is such a large amount spent on insurance for domestic risks as in Switzerland. With gross value added of just under CHF 20 billion, the equivalent of around 4 percent of the national total, the insurance industry is a key pillar of the Swiss economy. It is also of considerable importance within the financial sector, playing a decisive role in enhancing diversification.
Several turning points that brought about major structural change are discernible in the recent history of the Swiss insurance industry. The breaking up of insurance cartels, the spread of technology, the reworking of business models after the failure of the bancassurance strategy and the formation of a reinsurance cluster in Zurich are all signs of this structural transformation. On the whole, the insurance industry has successfully survived this structural transformation – success that finds expression in notable efficiency and productivity gains.
In terms of growth, insurance was among the leading industries in the Swiss economy last year. As the economy begins to pick up again as from mid-2013, demand for insurance services will grow, as will potential for financial investments. BAKBASEL expects the insurance industry to continue posting above-average rates of growth. If conditions remain attractive in Switzerland, we also expect the reinsurance cluster in Zurich to continue gaining in strength.
Switzerland's attractiveness as a business hub is one of the key prerequisites for many of the positive effects and future opportunities of the insurance industry. The fact that numerous leading companies in the insurance and finance industries choose to set up shop in Switzerland is one indication of that attractiveness. Key elements in the country's popularity as a business location are the reliability of its general regulatory environment, its political and economic stability, top-flight infrastructure and accessibility as well as competitive taxation system and sound public finances.
The availability of qualified workers is another key factor for companies when choosing a business location. Thanks to its excellent system of education and training and its unparalleled quality of life, Switzerland is still in a position to meet this need. However, as a growing scarcity of insurance specialists is becoming apparent worldwide, the county must ramp up its efforts in this area. In addition to keeping the location attractive for private individuals, more targeted (further) training of local personnel is another means of countering this trend.
The industry is monitoring trends in insurance-specific regulation with concern. Depending on the ultimate design of Solvency II – the European counterpart to the Swiss solvency test (SST) – it is conceivable that Switzerland may be placed at a big disadvantage compared with other locations. Major opportunities are offered by the ongoing spread of technology throughout the industry, by climate change and by the tapping of new markets. Over and above emerging markets (for reinsurers), new opportunities could arise for the industry from a treaty on freedom of services with the EU. However, market deregulation of this kind not only offers opportunities, but – at least in the short term – also poses risks in the shape of a trend towards consolidation.