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FOPI News no. 20

FOPI News no. 20 of 28 November 2008 ─ Entry into force of new and revised directives

The implementation of insurance supervision law is progressing: Based on the relevant legal foundations, the Federal Office of Private Insurance FOPI has issued five new or revised directives. New directives entering into force concern the Swiss Solvency Test (SST) and technical provisions for life insurance and non-life insurance. The directive on investments in tied assets and the framework directive on auditing have been amended.

The directive on the Swiss Solvency Test (SST) applies to all insurance undertakings, insurance groups, and insurance conglomerates subject to Swiss supervision pursuant to article 2, paragraph 1(a) of the Insurance Supervision Act (ISA) in conjunction with articles 65 and 73 ISA, with the exception of branches of foreign insurance undertakings and reinsurance captives in general in accordance with article 2, paragraph 1 of the Supervision Ordinance (SO). The goal of the directive is to further specify the requirements for performing the SST, for the internal models, and for reporting to the supervisory authority.

The directive on technical provisions for life insurance governs the establishment and dissolution of technical provisions for life insurance. It further specifies and clarifies the existing rules set out in the Insurance Supervision Act and the Supervision Ordinance since 1 January 2006. The focus is on the ability to fulfil the obligations arising from life insurance business, which are typically long-term. The technical provisions must be systematically reviewed each year and adjusted as needed.

The directive on technical provisions for non-life insurance governs the establishment and dissolution of technical provisions for non-life insurance. The directive further specifies the types of provisions referred to in the Supervision Ordinance (SO) and specifies the bases for assessment. This directive also specifies that an insurance undertaking must have the necessary organisational and procedural structure to fulfil the quality requirements for provisions. Special features of health insurance in accordance with the Insurance Contract Act (ICA) are governed by a separate directive.

The directive on investments in tied assets and the use of derivative financial instruments ("investment directive") entered into force on 1 September 2006. In addition to a restructuring and formal clarification of the directive, several adjustments were carried out that were necessitated by practice and the developments on the financial markets. As part of the formal clarification of the directive, its structure was fundamentally revised. The general investment principles and certain limits have also been further developed.

The framework directive on auditing of 21 November 2007 was also revised. On 21 November 2007, the Federal Office of Private Insurance FOPI issued the framework directive on the activities of independent auditors of insurance undertakings. Due to changes in the Code of Obligations and insights gained from the evaluation of reports for the 2007 business year, the annexes and supplements of Directive 6/2007 have been modified.

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