Switzerland is an attractive economic location. In the latest Global Competitiveness Report of the World Economic Forum, Switzerland comes in second behind the USA, making it the most competitive European country. This provides Swiss and foreign insurance companies with attractive structural conditions for operating insurance businesses within and out of Switzerland. 214 private insurance companies are registered with the supervisory authority. The palette includes globally active universal insurers, the world’s largest reinsurers, subsidiaries of foreign insurance groups, and local providers of special solutions.
Foreign markets are of the utmost importance to Swiss insurers. Two thirds of the insurers’ premium-based income of 162 billion Swiss francs was derived from other countries. Recently, several foreign insurers moved their headquarters to Switzerland.
Safety, political stability, high quality of life, highly skilled workforce, a globally interconnected and open finance sector, and an attractive fiscal environment are the most cited reasons for deciding to relocate a company to Switzerland.
Great economic importance
The well-positioned insurance industry plays an important role in the Swiss economy. By hedging entrepreneurial risks, they enable innovations and progress. Raising the gross value added by roughly 50 per cent since the early nineties, the branch is counted among the reliable growth engines of the Swiss economy. In terms of productivity (that is value added per employee), the insurance branch is at the top of the Swiss economic sectors. The corporate taxes of private insurers alone amount to approximately one billion Swiss franks.
Private insurers provide 47,500 jobs in Switzerland and 78,500 in other countries. More than 15 per cent of the total foreign capital of Swiss companies (that is 97 billion Swiss franks) is from insurers.
Staying at the top and growing stronger
Nowadays, the Swiss insurance industry is top of the class. The goal in the global competition must be to maintain the top position and to grow even stronger. For, the top class is the only option for the branch if it wants to maintain its international influence and present significance. However, this goal comes with great challenges. Insurers must assert themselves in an innovative, dynamic and increasingly international environment. Demographic changes, global “mergers”, climate change and branch regulations are further challenges that insurers must surmount.
Good structural conditions are crucial
Developing suitable structural conditions on a national and international plane is essential for success. While just a few years ago the prevailing idea was to limit laws to a strict minimum and to promote personal responsibility as well as self-regulation, a new trend towards overregulation has appeared. This trend absolutely must be reversed and the insurance market liberalized again.
In contrast, politicians are very hesitant to tackle more urgently needed reforms such as social security. There is also a need for reform in the areas of corporate taxation as well as the taxation of life insurances. Especially in view of the aging of the population, retirement products must not be made unattractive with tax disadvantages. Therefore, life annuities must be taxed appropriately and stamp duties on insurance policies done away with.
Relations with the European Union are of the utmost importance to the Swiss insurance industry. In this regard, the free movement of people must be extended to the new EU member states Romania and Bulgaria. This is necessary to safeguard the proven bilateral treaties on the one hand and to continue to provide the branch with sufficient skilled foreign recruits on the other. Moreover, our branch is currently examining the possibility of extended mutual market access. Especially in the life insurance business, this would open up a large market potential for Swiss insurers.
Supervision: Switzerland ahead of the EU
A modern supervisory system is also essential for competitiveness. Switzerland already has one. Our country has already introduced what in the EU is still being legislated in the form of Solvency II.
For Switzerland, it is crucial that supervision is mutually recognized as equivalent, in order to guarantee the supervision of groups. Furthermore, the expert commission on integrated financial market supervision started operating in Switzerland in early 2009. This integrates the supervision of the various financial market players into one body. The insurance industry welcomes this step. For, a strong and internationally recognized supervisory authority promotes the confidence in our financial market and is an important asset in the international location competition.
The author was born in 1947 and is president of the Swiss association of insurers as well as president of the board of directors of the Helvetia Group. Mr Walser graduated in economics at the university of St. Gallen in 1972 and in law at the university of Bern in 1975. After being active in the banking industry, he joined the Helvetia Group in 1979.