Business with professional policyholders – regulations from 1 January 2024

The regulations governing business with professional policyholders are set to change with the entry into force of the revised Insurance Supervision Act (ISA) and revised Insurance Supervision Ordinance (ISO) on 1 January 2024. The changes are summarised here.

The new framework for business with professional policyholders under the revised ISA and revised ISO is designed to align the intensity of regulation and supervision more closely with customers’ need for protection.

For example, professional policyholders can be assumed to be able to assess the solvency and counterparty risk of insurance companies themselves. Therefore they do not need the statutory protection afforded by tied assets in accordance with Article 17 ISA. The possible exemptions an insurance company can apply for in this context are set out in Article 30a ISA and include organisation funds, the recovery plan and tied assets. The definition of professional customers is contained in the Insurance Contract Act (ICA).

Various obligations for insurance companies

There are a number of obligations associated with the exemptions, however. Insurance companies that claim the exemptions under the ISA are legally obliged to clarify and document the status of professional policyholders before concluding a contract. Moreover, an insurance company that insures professional policyholders must inform them of their designation as professional policyholders. The insurance company also has a disclosure obligation to inform professional customers of the legal consequences of this designation, specifically if their claims are not backed by tied assets. Professional customers must be informed before the contract is concluded. In the event of a breach of this disclosure obligation, Article 3a ICA applies.

Application for exemptions under Article 30a ISA

All primary insurers are eligible to apply for the exemptions set out in Article 30a ISA. However, business with professional policyholders which can result in claims by non-professional policyholders under mandatory insurance is excluded. In addition, insurers must create tied assets when covering occupational pension risks.

When the revised ISA and revised ISO enter into force on 1 January 2024, insurance companies will not benefit automatically from the potential exemptions for business with professional policyholders contained in Article 30a ISA. Insurance companies that wish to claim the exemptions must apply to FINMA to do so. If FINMA approves the application, the insurance companies will be exempt from certain requirements in the legislation.

An application for exemption under Article 30a ISA can only be made for new business or if existing customers are transferred via new contracts or amendments to their contracts (cf. Art. 111c para. 2 ISO). In all such cases, the insurer must comply with its clarification, documentation and disclosure obligations. The insurance customers must expressly agree to any change of contract and the legal requirements must be observed. The existing client base (where there have not been any contract amendments) and run-off business are excluded from the exemptions.

The ISO and ISO-FINMA also contain specific provisions on creating and managing portfolios or part-portfolios containing insurance contracts with professional customers.

The provisions in the ISA and ISO regarding organisation and risk management must also be complied with for business with professional policyholders. The insurance company is required to have an appropriate organisation and appropriate processes, risk management and an internal control system (ICS) to operate, manage and monitor the business with professional policyholders in a manner commensurate with the risks.

Monitoring compliance with the regulations for business with professional policyholders

FINMA monitors compliance with the rules governing business with professional policyholders annually or if circumstances require. It will collect the information it needs to fulfil this mandate. It can also use the results of audits by FINMA mandataries.

To better monitor compliance with the regulations FINMA also conducts in-depth reviews at selected insurance companies.

Information on business with professional policyholders

Below you will find the key information regarding business with professional policyholders.