Long-term guarantees and the interest rate cycle

Read the PDF edition (2 pages)

The years of low interest rates exposed a structural weakness of life insurance: the guarantee of a minimum interest rate over decades. Policies concluded in the 1980s and 1990s often guaranteed technical interest rates of 3 to 4 per cent, while yields on Swiss government bonds fell below zero.¹ The market-consistent valuation of the SST made the cost of these guarantees fully visible, obliging life insurers to hold substantial capital against them. Insurers reacted by reducing guarantees for new business and shifting to capital-light products, such as unit-linked policies, in which the policyholder bears the investment risk.

In occupational pensions, the problem was particularly acute because the insurers offered full insurance (Vollversicherung), in which they guaranteed all benefits, including the minimum interest rate and the conversion rate prescribed by law for mandatory pensions. In 2018, AXA Switzerland announced that it would withdraw from full insurance with effect from 1 January 2019 and transfer its clients to collective foundations with semi-autonomous solutions.² Other insurers reduced their full insurance business. Only a few insurers continue to offer full insurance today, among them Swiss Life and the combined Helvetia Baloise group. The product remains popular among small and medium-sized enterprises. Chapter IV of this part examines the consequences for the pension fund landscape.

Notes

On technical interest rates guaranteed in Swiss life insurance in the 1980s and 1990s and their reduction over time, see FINMA's maximum technical interest rates and the annual reports of the Swiss life insurers. Figures to be verified. ↩
AXA Switzerland's announcement of April 2018 to withdraw from full insurance in occupational pensions with effect from 2019 and the transfer of its clients to collective foundations; see AXA's press releases and the financial press. To be verified. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.

English

Contact

Dr Alexander Ressos, TEP

Rechtsanwalt/Attorney-at-Law

I am a Swiss attorney-at-law and also admitted as a solicitor in Hong Kong and in England & Wales, with almost 25 years of experience.

Together with my multilingual team, including Chinese, Japanese, Korean, Russian, Ukrainian and French native speakers, I advise companies and their owners from around the world on the full range of banking, corporate, commercial and tax law matters in Switzerland, including international tax planning, fiduciary services, and legal family office services including immigration & relocation or real estate investments. My practice has a particular focus on clients from growth and frontier markets in Greater China, Central Asia and the Caucasus, the rest of Asia, the Middle East, Africa and Latin America, and I equally advise clients from Europe and North America. Through an affiliated Swiss trust company, we also take care of the incorporation and ongoing administration of their companies and other structures, including accounting, tax returns and corporate secretarial services, and I serve as a professional director where required. With the support of a network of first-class cooperation partners, I also implement solutions worldwide.

My approach is to act as a trusted advisor who works directly with decision-makers, on an equal footing: I start from what you want to achieve and shape every structure, contract and tax decision around your commercial goals and how it improves your after-tax return. As “lawyers who make it happen”, my team and I stay involved until your company is set up, your structure is in place and your transaction has closed, and we remain available for any follow-on work that may be required. You benefit from bespoke solutions and personal attention, and sound, friendly and practical advice. We are not the lowest-cost provider in the market, nor do we intend to be; our aim is to deliver well-founded, proper solutions and excellent value for money.

Get in touch →

Long-term guarantees and the interest rate cycle

Notes

Setting up or expanding in Switzerland?