Insurance special purpose vehicles under the revised Insurance Supervision Act

Why Switzerland had no vehicles of its own

For more than a quarter of a century, the special purpose vehicles through which Swiss sponsors and Swiss investors participated in the catastrophe bond market were almost all domiciled abroad. The reasons were legal. Under the Insurance Supervision Act of 2004, a Swiss company that assumed reinsurance risk was a reinsurer and needed a licence with the full array of capital, solvency and governance requirements that apply to reinsurance companies. A fully collateralised single-transaction vehicle has no need for most of those requirements, because its obligations are limited to the collateral it holds and investors knowingly bear the risk of loss. Bermuda, the Cayman Islands and Ireland offered tailored regimes. Switzerland did not. The Gurten transaction of 2015 is the standard example of a Swiss franc deal that, for this reason, had to be placed through Bermuda.

Articles 30e and 30f ISA and the ordinance

The revision of the Insurance Supervision Act, discussed in the previous chapter as a whole, filled this gap with effect from 1 January 2024. Two authors from Swiss Re summarised the new regime shortly afterwards. The statutory basis lies in Articles 30e and 30f of the revised Act, with the details set out in Articles 111d to 111u of the revised Insurance Supervision Ordinance. A Swiss insurance special purpose vehicle assumes risks from reinsurance companies only. It is not itself an insurance company and may not hold a second licence as one. The risks ceded to it must be fully collateralised by financial instruments that are subordinated to the risk assumption obligations, so that investors bear the loss if the insured event occurs. The vehicle needs authorisation from FINMA. In return it is exempt from the comprehensive solvency regime that applies to insurers, faces relaxed governance requirements and does not need to appoint a responsible actuary.¹ An overview by Bär & Karrer confirms the location of the provisions in the Act and the ordinance.²

The design follows the familiar international model. Restricting the vehicle to risks assumed from reinsurers keeps it outside the retail insurance market and ensures that the counterparty on the other side of the contract is a professional institution. The requirement of full collateralisation makes the vehicle’s solvency a matter of structure. It eliminates the need for a risk-based capital calculation, because the vehicle can never owe more than the collateral it holds. The relaxed governance rules reflect the fact that such vehicles usually have no staff and are administered by service providers. Supervision by FINMA, on the other hand, gives sponsors and investors the assurance that the vehicle and its administrators are fit and proper, and gives the Swiss authorities insight into risk transfer that might otherwise escape them.

Assessment and comparison

Whether the new regime will draw a meaningful share of issuance to Switzerland remains open. The competition is established and experienced. In Bermuda, the Monetary Authority registered twenty-five special purpose insurers in 2025, twenty-three of them restricted vehicles for catastrophe bonds, together with ten collateralised insurers, the highest number of the latter in a single year. Artemis describes Bermuda as the leading domicile for insurance-linked securities.³ Guernsey, which claims to have pioneered the protected cell company, has built a niche in collateralised catastrophe reinsurance and in incorporated cell companies used for longevity risk transfer by pension schemes.⁴ Within the European Union, Ireland authorises special purpose vehicles under the Solvency II framework. The Central Bank of Ireland requires such a vehicle to be fully funded at all times, to demonstrate this in its application and its annual supervisory report, and to obtain authorisation before it is established, which usually takes up to six months.⁵

Against these competitors, a Swiss vehicle offers the reputation of Swiss supervision, proximity to Swiss sponsors and investors, and the possibility of a Swiss franc transaction under Swiss law without an offshore element. Its disadvantages lie in cost, in the relative inexperience of local administrators with this particular structure, and in tax questions that the supervisory legislation does not resolve, such as the treatment of the vehicle and its notes under the federal stamp duties and withholding tax. For the historian, Articles 30e and 30f are revealing whatever volume of transactions they may eventually attract. After a quarter of a century in which Zurich’s reinsurers and investors used Bermuda as their legal workshop, the Swiss legislator has accepted that the transfer of insurance risk to capital markets is a normal part of the Swiss financial centre and deserves a domestic legal form.

Notes

1. Fabian Meier and Matthias Wühler, “Swiss Insurance Supervision Act establishes new Regime for Special Purpose Vehicle”, CapLaw-2024-35, on Articles 30e and 30f nISA and Articles 111d–111u of the revised ordinance, in force since 1 January 2024, on full collateralisation through subordinated financial instruments, the restriction to risks from reinsurers, FINMA authorisation and the exemption from full solvency regulation, https://caplaw.ch/2024/swiss-insurance-supervision-act-establishes-new-regime-for-special-purpose-vehicle/. ↩
2. Peter Ch. Hsu and Daniel Flühmann (Bär & Karrer), “Insurance and Reinsurance in Switzerland: Overview” (law stated as at 1 March 2025), on the ISA provisions on insurance special purpose vehicles (Article 30e et seq. ISA and Article 111d et seq. ISO) and on minimum capital of CHF 3 million to CHF 20 million for insurers, https://www.baerkarrer.ch/userdata/files/publications/2025/apwp38kfkkukuuexcebl.pdf. ↩
3. Artemis, “Collateralized insurer uptake lifts Bermuda cat bond, ILS registrations in 2025”, on twenty-five SPIs registered in 2025 (twenty-three restricted SPIs for cat bonds), ten collateralised insurers and Bermuda’s position as the leading ILS domicile, https://www.artemis.bm/news/collateralized-insurer-uptake-lifts-bermuda-cat-bond-ils-registrations-in-2025/. ↩
4. Guernsey Financial Services Commission, “Insurance in Guernsey”, on Guernsey as a leading captive centre that pioneered the protected cell company, its use of incorporated cell companies for longevity risk and its role as a centre for reinsurance and ILS specialising in collateralised catastrophe reinsurance, https://www.gfsc.gg/industry-sectors/insurance. ↩
5. McCann FitzGerald, “Solvency II Special Purpose Vehicles” (14 May 2018), on the Solvency II basis of SPVs, the fully funded requirement, the Central Bank of Ireland’s approval process and supervision under PRISM, https://www.mccannfitzgerald.com/knowledge/financial-services-regulation/solvency-ii-special-purpose-vehicles. ↩

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 September 2025.