The 1989 Insurance Agreement opens up parts of the insurance market between Switzerland and the European Union. It creates a level playing field, allowing Swiss non-life insurance companies to establish and acquire agencies and branches in the EU. The agreement also reduces regulatory requirements. Reciprocal conditions apply to EU insurance companies operating in Switzerland.
A 1973 Directive of the then European Economic Community (EEC) prohibited discrimination against insurance undertakings in member states. The Directive concerned the taking-up and pursuit of the business of direct insurance other than life assurance but did not prohibit the unequal treatment of undertakings from third countries.
It was therefore theoretically possible to discriminate against Swiss companies. At the time, the Swiss insurance industry had established a large number of branches within the EEC. It therefore had an interest in being able to compete on a level playing field with local insurance companies. As a result, Switzerland started negotiating with the EEC with a view to entering into an insurance agreement that would ensure equal treatment. The agreement was initialled in 1982, but additional rules amending or supplementing the 1973 Directive had been adopted in the intervening period. The agreement between Switzerland and the EEC was then amended in line with the new rules, and was initialled and subsequently signed in 1989.
The Insurance Agreement between Switzerland and the EU provides for reciprocal freedom of establishment
The agreement creates a level playing field, allowing Swiss insurance companies to establish and acquire agencies and branches in the EU. Reciprocal conditions apply to EU insurance companies operating in Switzerland. The agreement has the added advantage that Swiss insurance companies with EU branches do not need to perform separate solvency calculations and deposit capital in relation to specific branch undertakings. Instead, the supervisory authority in the EU member state in which a branch is based may rely on the solvency capital requirement determined by the Swiss Financial Market Supervisory Authority (FINMA) for the Swiss company as a whole, including all its branches.
The Insurance Agreement solely applies to direct insurance other than life insurance (household contents, motor vehicle, travel and liability insurance, etc.). Life insurance, reinsurance undertakings and statutory social security schemes fall outside the scope of the agreement. In addition, the agreement only provides for freedom of establishment, but does not allow companies to engage in cross-border insurance activities.
The Swiss Solvency Test (SST), a new solvency regime for private insurance companies, came into effect in Switzerland in 2011. The EU Solvency II Directive, which entered into force on 1 January 2016, also amended the solvency requirements. Switzerland and the EU amended the annexes to the Insurance Agreement in line with these updated solvency requirements. The amendments were adopted on 3 July 2018. In 2015, separately from the Insurance Agreement, the EU Commission had previously recognised the Swiss regulatory regime for private insurance companies as being equivalent to the regime under EU law.
- 01.01.1993: Agreement entered into force
- 30.01.1992: Parliament approved agreement
- 01.10.1989: Agreement signed
Significance of the insurance industry to the Swiss economy
In 2019, Swiss private insurance undertakings employed roughly 47,000 people within Switzerland and just under 150,000 outside Switzerland. In the non-life sector, EU-based branches generate more than CHF one billion in gross premiums (gross premiums earned).
Given the huge importance of the European market, it is essential to ensure freedom of establishment for Swiss companies in the EU. The Insurance Agreement has been effective in that it has enabled a number of Swiss companies to establish or acquire branches in the EU for the purpose of offering non-life insurance. They also face fewer regulatory requirements in managing these entities, placing them in a stronger position in the global marketplace.