REGULATORY REQUIREMENTS | After years of preparation, the new Swiss Financial Market Supervisory Authority (FINMA) commenced operations on 1 January 2009. FINMA brings together the Federal Office of Private Insurance (FOPI), the Swiss Federal Banking Commission (SFBC) and the Anti-Money Laundering Control Authority (AMLCA).

FINMA is responsible for integrated insurance supervision to protect insured persons from the consequences of insolvency or abusive practices. The core element of this approach is the Swiss Solvency Test, serving to determine economic risk exposure and risk capacity. Following a five-year transitional period, solvency in accordance with the SST will become binding for all Swiss insurance companies on 1 January 2011. The quantitative approach is complemented by the Swiss Quality Assessment (SQA) tool, which focuses on qualitative aspects. This process involves assessing companies with regard to corporate governance, risk management and internal controls. Traditional supervisory instruments such as the Solvency I requirements and requirements for tied assets continue to be applied.

Swiss Life took appropriate measures during the financial year to strengthen risk-based solvency in accordance with the SST. These included the reduction in equity exposure and hedge fund investments, but also the introduction of various additional hedges. Moreover, the suspension of the share buyback programme had a stabilising effect on Solvency I at Group level. Similarly, a lower dividend than originally projected also helps to strengthen Group solvency.

The European Union is also aiming to set up a risk-based solvency supervision mechanism with its Solvency II project. The European Commission published an initial draft directive on 10 July 2007. An amended version followed on 26 February 2008. As things currently stand, however, Solvency II is unlikely to be in operation before 2013, at the earliest. As Swiss Life is domiciled in a non-member state, the EU’s rules and regulations with regard to third-party states are extremely important. The EU’s framework directive is also aimed at streamlining the group supervision, based on the principle of equivalence. The Swiss insurance industry is working to ensure that this principle is applied to all insurance companies, regardless of where their head office is domiciled, to create equal competitive conditions for all.

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