The insurance market in Switzerland has coped well with the difficult economic environment, according to the country's trade association
The Swiss Insurance Association issued the following statement on the state of the domestic market.
The Swiss insurance industry has stood firm in the face of the extraordinarily volatile environment of 2008, and is still solid. Life insurance business posted 2.3% growth over the previous year, and non-life insurance grew by 0.5%. The Swiss Insurance Association (SIA) anticipates that, backed by their high levels of operational strength, insurers will post positive results from insurance business but that their investment returns will be affected by the financial market crisis.
Zurich, 20 January 2009 - For private insurers, the financial crisis and its attendant exceptional volatility on the capital markets was the main event of 2008, and their investments suffered accordingly. This contrasts with the anticipated solid results from insurance business thanks to insurance companies’ high levels of operational strength, slight growth in non-life insurance, renewed confirmation of a trend towards increased premium volume in life insurance, and the absence of any major storm-related losses.
Continued upward trend in life insurance
According to the projections of the Swiss Insurance Association SIA, life insurance business - both group and individual life – posted growth of 2.3% in 2008 over the previous year. In group life business, premium volume was up by 2.8%, confirming the trend that started in 2007 in occupational pensions business. Full insurance with guaranteed savings is popular with SMEs, particularly in difficult times, as a guarantee of security. Growth in individual life business was not as strong as in occupational pensions business, with an increase of 1,1% over the previous year, although individual endowment insurance with single premiums saw a particularly sharp rise of 4.2%, thanks to the effect of the special role that life insurance plays as a safe haven for people’s savings in times of uncertainty. However, premiums in the individual endowment insurance segment overall were down 2.4%. The unit-linked life insurance trend continues, recording growth of 8.2% over the previous year.
Intensified competition slows growth in non-life insurance
Swiss non-life insurance business saw slight growth of 0.5% during the 2008 financial year. In comparison, last year saw an increase of 1.2%, and in 2006 growth stood at 2.3%. The continued slowdown in premium growth in the non-life segment is mainly due to increasingly strong competition among insurance companies in what is a largely saturated market. Premium volume in motor insurance remained at last year’s level. Insurers have been giving more premium discounts, particularly in this line of business, and this has had an impact on premium volume. In contrast, fire, natural perils and other property insurance lines reported growth of 1.9%.
Insurers’ business model proves its worth
Despite the massive upheavals in the financial sector and the associated impact on insurers’ investments, SIA Chairman Erich Walser drew positive conclusions from 2008: «Despite the sheer scale of the crisis on the financial markets, the insurance industry remains strong. A cautious investment policy coupled with a business model geared towards long-term security prove their worth in times of turmoil.» And Mr Walser expressed cautious optimism about the year ahead: «If we can contain the impact of the financial market crisis, the outlook for the insurance sector should remain positive.»
Clear rejection of Suva’s expansion aspirations – firm support for free movement of persons
The legal conditions surrounding occupational pensions are a topic of ongoing importance to the SIA, as there is still no fixed formula for calculating the minimum interest rate. However, the decision made by Parliament in December 2008 to adjust the minimum conversion rate was most welcome. The National Council is likely to be considering the revision of the Accident Insurance Act in the summer. The SIA is committed to a modern, liberalised social insurance system and is campaigning for a clear divide between the remit of private accident insurers and Suva. The SIA also categorically rejects the expansion aspirations of the partial monopolist, as these would impede fair competition and infringe on the economic freedoms anchored in the constitution. Another draft bill of central importance to the insurance industry is the impending revision of the Insurance Contracts Act (VVG), which governs legal relationships between insurers and insurance clients. The SIA anticipates that the Federal Council will put the draft bill out for consultation in the near future.