VAG — Swiss Insurance Supervision Act (with AVO and AVO-FINMA)

The Insurance Supervision Act (VAG) together with the Supervision Ordinance (AVO) and the AVO-FINMA forms the three-tier regulatory framework for the supervision of insurance companies in Switzerland. It entered into force on 1 January 2006 and was most recently comprehensively revised effective 1 January 2024; at ordinance level, the revised AVO-FINMA entered into force on 1 September 2024.

• Licensing requirement: Insurance activities in Switzerland require a FINMA licence (Art. 3 VAG)
• Swiss Solvency Test (SST): Risk-based solvency assessment — target ratio 100%, intervention levels when falling short (Art. 9–9c VAG, Art. 22–41 AVO)
• Tied assets: Coverage of technical provisions through secure assets, with Prudent Person Principle since 2024 (Art. 17–20 VAG, Art. 56–79 AVO)
• Technical provisions: Actuarial valuation, responsible actuary (Art. 16, 23 VAG)
• Governance: Internal control systems, risk management, ORSA (Art. 14 VAG, AVO-FINMA)
• Group supervision: Consolidated supervision of insurance groups and conglomerates (Art. 64–74 VAG)
• Intermediary supervision: Registration requirement for insurance intermediaries since 2024 (Art. 40–42 VAG)
• Small-insurer regime: Since 2024, supervisory relief for categories 4 and 5 and a supervision-free sandbox (max. 5,000 policies / CHF 5m premium volume, Art. 30a VAG)
• Customer categorisation: Differentiated policyholder protection by customer category (Art. 30a–30d VAG, a European first)
• Recovery/resolution: Measures in case of imminent insolvency (Art. 51–56 VAG)

Swiss insurance supervision has a long tradition: the first Federal Act on the Supervision of Private Insurance Institutions dates from 1885. It was completely revised in 1978 and replaced by the current VAG, adopted by Parliament on 17 December 2004 and entering into force on 1 January 2006.

The AVO (SR 961.011) was enacted on 9 November 2005 as the Federal Council's implementing ordinance. Also on 9 November 2005, the then Federal Office of Private Insurance (BPV) issued the agency-level implementing ordinance as the AVO-BPV (SR 961.011.1); it entered into force together with VAG and AVO on 1 January 2006 and codified operational supervisory requirements. Following the creation of FINMA on 1 January 2009, the ordinance was renamed AVO-FINMA. 15 December 2015 marks not the first enactment but a partial revision of the AVO-FINMA.

On 2 June 2023, the Federal Council adopted a comprehensive partial revision of VAG and AVO, entering into force on 1 January 2024. Core objectives: strengthening policyholder protection and the competitiveness of Switzerland as an insurance hub. Key innovations are the small-insurer regime (supervisory relief for categories 4 and 5 and a supervision-free sandbox) and customer categorisation (Art. 30a–30d VAG, a European first). FINMA published the revised AVO-FINMA on 10 July 2024, effective 1 September 2024, newly codifying the areas of SST, tied assets, and technical provisions — five FINMA circulars were repealed as a result. While the VAG act itself (SR 961.01) was last amended effective 1 January 2024, the revised AVO-FINMA at ordinance level entered into force on 1 September 2024.

VAG/AVO/AVO-FINMA apply to:

• Insurance companies domiciled in Switzerland (direct insurers and reinsurers)
• Swiss branches of foreign insurance companies
• Insurance groups and insurance conglomerates (consolidated supervision)
• Insurance intermediaries (tied and independent agents, registration required from 2024)
• Captive insurers (with simplified requirements per Art. 14a VAG)

Excluded: Social insurance institutions (AHV, IV, Suva), health insurers in the KVG domain, cantonal public-law insurance institutions.

• Licensing (Art. 3–6 VAG): FINMA licence required before commencing insurance activities; submission of business plan with proof of solvency
• Swiss Solvency Test (Art. 9–9c VAG, Art. 22–41 AVO): Annual risk-based solvency calculation; target ratio ≥ 100%; standard model or internal model; intervention levels when falling short (action plan, distribution restrictions)
• Tied assets (Art. 17–20 VAG, Art. 56–79 AVO): Technical provisions must be covered by tied assets; since 2024 choice between catalogue approach or Prudent Person Principle with FINMA approval
• Technical provisions (Art. 16 VAG, Art. 54–55 AVO): Adequate provisions at all times; actuarial valuation methods; confirmation by responsible actuary
• Responsible actuary (Art. 23 VAG): Appointment of a FINMA-recognized responsible actuary; annual actuarial report
• Governance and ICS (Art. 14 VAG): Adequate organization, internal control system, risk management; ORSA (Own Risk and Solvency Assessment) per AVO-FINMA
• Small-insurer regime and sandbox (Art. 30a VAG): Since the 2024 revision, graduated supervisory relief for small insurers in categories 4 and 5; a supervision-free sandbox for very small insurers (max. 5,000 policies / CHF 5m premium volume); entry conditions include a three-year average SST ratio ≥ 250%
• Customer categorisation (Art. 30a–30d VAG): Differentiation of policyholders into customer categories with a graduated level of protection; reduced supervisory requirements for professional policyholders (a European first)
• Group supervision (Art. 64–74 VAG): Group SST, group-wide governance, intra-group transactions, risk concentrations
• Intermediary registration (Art. 40–42 VAG): Registration requirement in FINMA register; training and continuing education; professional liability insurance or equivalent security
• Reporting obligations (Art. 25 VAG): Annual reporting to FINMA; immediate notification of material events; publication of financial report
• Recovery/resolution (Art. 51–56 VAG): Protective measures when policyholders are at risk; recovery plan; licence revocation as ultima ratio

The 2024 partial revision introduced the small-insurer regime (supervisory relief for categories 4/5) and a supervision-free sandbox (entry conditions incl. three-year average SST ratio ≥ 250%; sandbox capped at 5,000 policies / CHF 5m premium). Customer categorisation (Art. 30a–30d VAG, a European first) is also missing as a standalone requirement. Not reflected in summary/key_requirements.

History and a key_date claim AVO-FINMA (SR 961.011.1) was 'first enacted' on 15 December 2015. Its official title is 'Ordinance of FINMA of 9 November 2005 ...'. It was originally enacted in 2005 (as AVO-BPV), in force 2006, renamed after FINMA's creation (2009). 15 Dec 2015 marks a partial revision.