Life insurance refers to all insurance relating to the uncertain nature of the duration of human life. From the client's perspective life insurance is a means of hedging against financial risks and, if it is capital forming, a tax-privileged form of savings. The most common types of life insurance are endowment, annuity and disability insurance. The fundamental elements of life insurance supervision are: monitoring compliance with Swiss law and with private insurance legislation, including statutory transparency rules; guaranteeing benefits for insured persons and protecting insured persons against consequences of insolvency; protecting insured persons against abusive practices; and ensuring compliance with contractual obligations.
Life insurance supervision
The supervision of life insurance companies has the following three key objectives:
- Monitoring compliance by life insurers with Swiss private insurance legislation, including statutory transparency rules;
- Ensuring compliance with contractual obligations, guaranteeing benefits for insured persons and protecting insured persons against consequences of insolvency;
- Protecting insured persons against abusive contractual conditions and disadvantages resulting from unequal treatment that is not legally or actuarially justifiable.
The main tasks involved in supervising life insurers are the same as those that apply to the entire private insurance sector. These are as follows:
- Granting licences to conduct insurance activities
- Reviewing and approving business plans
- Monitoring insurance activities on an ongoing basis
- Examining annual reports
- Checking solvency (Solvency I and the Swiss Solvency Test, SST)
- Reviewing and evaluating all relevant risks
- Approving mergers, portfolio transfers and the outsourcing of functions
- Checking reports on tied assets
- Implementing supervisory measures to protect insured persons against abusive practices and solvency risk
- Withdrawal of licences when insurance activities are discontinued
- Organising run-offs and release from supervision
With the exception of occupational pensions, the rates and the terms and conditions of insurance for life insurance activities do not require prior approval from the supervisory authorities. Even though this approval obligation no longer applies, the supervisory authorities are authorised to carry out on-site follow-up checks and inspections in order to ensure that the terms and conditions of insurance used comply with legal requirements and that the rates applied do not disadvantage the insured persons or jeopardise the solvency of the insurance company. Pay-out values are also still reviewed to determine that they are appropriate if a life insurance policy is terminated prematurely pursuant to Art. 91 ICA and Art. 127 SO.
For occupational pensions, however, what is known as the preventative approval obligation continues to apply. This means that the rates and the terms and conditions of insurance in the field of occupational pensions still need to be submitted to the supervisory authorities for approval before they can be offered on the market. The supervisory authorities will check whether the terms and conditions of insurance comply with legal requirements and whether the applicable premiums are such that they protect the insured persons against abusive practices and excessive security and profit margins, on the one hand, and against the consequences of solvency risk, on the other.
Other important components relating to the supervision of life insurance companies include monitoring actuarial provisions and tied assets (Art. 16 – 20 ISA, Art. 54 – 67 and 70 – 95 SO).