SWITZERLAND Law and Practice Contributed by: Lukas Morscher and Lukas Staub, Lenz & Staehelin
8. Insurtech 8.1 Underwriting Processes
Capacity ). It should be emphasised that higher fees may be charged for typical high-frequency trading techniques.
In Switzerland, insurtech has been growing fast, in part due to organisations pursuing business models that are based on general challenges faced by tradi - tional insurers, such as new regulatory frameworks, alternative capital sources and ongoing low inter - est rates. In general, traditional insurers face lower barriers when entering the insurtech market as they already have the required licences and can focus on developing the technology. To date, there is no specific legislation governing insurtech business models. Therefore, any regulatory implications for insurtech models must be assessed based on the general principles governing insurance services provision, especially those related to FINMA’s insurance supervision objectives. The revised insur - ance regulations have introduced, among other things, more stringent requirements for insurance intermedia - tion and new criteria for supervision by FINMA as of 1 January 2024. 8.2 Treatment of Different Types of Insurance Swiss insurance supervisory law contains specific provisions for different types of insurance. ISA distin - guishes between three kinds of insurance: life insur - ance, indemnity/non-life insurance and reinsurance. A key point is that life insurers can only offer casualty and sickness insurance besides life insurance. Dif - ferent rules also apply with regard to capital require - ments. Moreover, mandatory sickness insurers follow a completely different regulatory regime under Swiss law. While FINMA is the competent supervisory authority under ISA, the Federal Office of Public Health super - vises insurers providing mandatory sickness insur - ance. Recently revised legislation, which entered into force on 1 January 2024, brought considerable sim - plifications for reinsurers as well as insurers that only serve professional clients. Also, the rules applicable to insurance intermediaries were revised and gener - ally brought additional requirements and obligations for untied insurance intermediaries (such as insurance brokers). According to the Swiss government, some of the newly introduced requirements for pure reinsur -
7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
Pursuant to the FMIO, authorised trading facilities are required to impose upon all participants an obligation to notify the trading facility of the use of algorithmic trading and to flag all orders made by algorithmic trad - ing. In addition, a market participant requires authorisation as a securities firm by FINMA pursuant to FinIA if: • it trades in securities in its own name for the account of clients; • it trades in securities for its own account on a short-term basis and publicly quotes prices for individual securities upon request or on an ongoing basis; or • it trades in securities for its own account on a short-term basis, operates primarily on the financial market and is a member of a trading facility. 7.3 Regulatory Distinction Between Funds and Dealers The transparency requirements in relation to algo - rithmic trading apply to all market participants alike (see 7.2 Requirement to Register as Market Mak- ers When Functioning in a Principal Capacity ). In addition, fund managers are subject to the regulatory regime under FinIA, and funds are governed by the Collective Investment Schemes Act, while dealers may qualify as securities firms (see 7.2 Requirement to Register as Market Makers When Functioning in a Principal Capacity ). 7.4 Regulation of Programmers and Programming Under Swiss law, there is no specific regulation of programmers and programming. However, the FMIA requires marketplaces to identify and monitor algo - rithmic and high-frequency trading (see 7.1 Creation and Usage Regulations ), which may indirectly affect programmers and programming.
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