Sol­id per­for­mance in a com­plex in­sur­ance en­vi­ron­ment

NewsArchive22 November 2017

Urs Berger, the chairman of the SIA.

In the complex economic environment of 2016, the Swiss insurance industry once again furnished tangible evidence of its economic importance. Premium volume in non-life insurance rose once more as compared to the previous year. With interest rates at a record low and ever-increasing regulation, life insurance premiums for the same period came in at a lower level than in 2015.

Zurich, 02 February 2017 – Once again, the insurance industry faced continuously low interest rates and ever-increasing regulation in 2016. «Swiss insurers performed creditably and contributed to a stable economy in Switzerland», said Urs Berger, president of the Swiss Insurance Association SIA. The Swiss insurance industry contributes 47% to the total added value generated by the country’s financial sector. In Swiss francs, its contribution amounts to CHF 27.9 billion, or 4.5% of the total added value generated in this country. The insurance industry therefore ranks solidly among the top ten Swiss industries. Claims settlements for 2016 are expected to correspond roughly to the long-term annual average according to SIA estimates.

Continuous growth in non-life insurance

According to the SIA’s projections, non-life premiums grew by 1.1% in 2016 thereby confirming the segment’s stable growth. Motor vehicle insurance saw premiums grow by 1.3% as the number of licensed motor vehicles is on the increase. Premium volumes in fire, natural disaster and property damage insurance decreased by 0.9% due to pricing pressure and a benign claims experience over the last years pushing down premiums.

Decreasing premium volume in life insurance

The SIA expects life insurance premiums to fall by 6%. The persisting record low in interest rates makes it difficult to issue interest rate guarantees. Therefore, premium volume in individual life insurance came in lower by 5%. Group life insurance, i. e. life-insurance-based pension solutions for small and medium enterprises (SMEs), saw a decrease in premium volume of 6.3% as compared to 2015. While periodic premiums registered next to no change, single premium volume shrunk by 10.9%. This type of coverage enjoys unbroken popularity, but life insurers struggle to offer comprehensive protection in an environment characterised by persistently low interest rates and high capital requirements.

Core challenges

Old-age insurance reform: Demographic change and the vagaries of the financial markets affect life insurers that offer occupational pension solutions for SMEs. This has been and still is a reason for them to endorse the 2020 pension system reform – from the beginning. If the Swiss old-age pension system is to be financially stabilised without lowering benefits currently provided, this reform is a matter of urgency.

Climate Change: A challenge for non-life and reinsurance companies, as climate change makes for more frequent and more intense extreme natural events and corresponding increases in claims and damages. The Swiss private insurers therefore acknowledge the need for a sustainable climate policy.

Digitisation: Digital opportunities and challenges abound in insurance. On the one hand, insurers need to adapt their processes and adjust their strategies to a digitised economy, on the other, the possible effects on the political framework need to be addressed by the SIA. The upcoming complete revision of the Data Protection Act is a case in point. In drafting the Act, the Federal Council basically opted for a framework concept, thereby deviating from European Union and its complex General Data Protection Regulation. The Swiss insurance industry welcomes this drive towards concise regulations and the fact that the draft allows for flexible solutions inasmuch as it does not address any specific technology. However, the draft version also sets out new obligations that need to be assessed in view of their viability in insurance.