Regulating the investment side: managers, funds and pension investors

The managers under the Financial Institutions Act

A manager in Zurich that invests in catastrophe bonds for clients is, in Swiss law, an asset manager like any other. Since the Financial Institutions Act took effect on 1 January 2020, anyone who manages collective investment schemes or the assets of occupational pension schemes on a commercial basis in Switzerland needs a licence from FINMA as a manager of collective assets under Articles 24 et seq. of that Act. The requirement also covers foreign managers who employ staff in Switzerland to manage such assets on a permanent basis. De minimis thresholds allow small managers of funds reserved for qualified investors, or of limited pension assets, to operate as ordinary portfolio managers under the lighter regime of the same Act. An applicant must show an appropriate organisation, minimum capital and at least one collective investment scheme or pension scheme under management.¹

The licensing regime has a practical importance for insurance-linked strategies that goes beyond prudential supervision. Swiss pension funds, which are among the most important investors in the asset class, may entrust their assets only to managers that meet the requirements of the occupational pension legislation, which a FINMA licence is the usual way of satisfying.² A manager that wishes to serve Swiss pension funds therefore has a strong reason to be licensed in Switzerland, which helps to explain why several international firms keep a regulated entity in Zurich. The licensing of LGT ILS Partners as a FINMA-regulated manager in 2014, noted above, is an example.

The funds: Swiss categories, the L-QIF and foreign vehicles

The funds through which investors hold insurance-linked securities come in several forms. Swiss collective investment law distinguishes securities funds, which are broadly comparable to European UCITS, from other funds for traditional investments and other funds for alternative investments, which permit higher leverage and a wider range of assets. Real estate funds form a separate category.³ A catastrophe bond fund with a portfolio of rated, liquid notes may fit into the category of other funds for traditional investments, while a fund that writes collateralised reinsurance or invests in private transactions belongs to the alternative category. Each such fund requires approval by FINMA before it may be launched.

Since 1 March 2024 Swiss law has offered an alternative in the form of the Limited Qualified Investor Fund, or L-QIF, governed by Articles 118a to 118h of the Collective Investment Schemes Act and Articles 126c et seq. of the implementing ordinance. An L-QIF needs no approval from FINMA, although it must be managed by a supervised institution and is open only to qualified investors. In the contractual and investment company forms, it must reach net assets of at least CHF 5 million within one year of launch and appoint a supervised custodian bank. It may invest in a wide range of alternative assets, subject to limits on borrowing and total commitments. Occupational pension institutions with a professional treasury count as qualified investors and may therefore subscribe.⁴ The L-QIF was designed to compete with the Luxembourg reserved alternative investment fund. Whether it will attract insurance-linked strategies in significant volume depends on the willingness of managers to bring back to Switzerland funds that they have long domiciled abroad.

For the time being, most insurance-linked funds managed from Zurich are domiciled outside Switzerland. Catastrophe bond funds in the European UCITS format, domiciled mainly in Ireland and Luxembourg, have become the principal channel through which wealth managers and smaller institutions gain access to the asset class. Artemis, which compiles their assets with the help of the Zurich manager Plenum, reported that UCITS catastrophe bond funds together held more than USD 21 billion in July 2026, having passed USD 20 billion in February of that year.⁵ Distribution of such funds to qualified investors in Switzerland is simple. Swiss law is described in practitioner literature as extremely liberal towards foreign funds offered exclusively to qualified investors, which may be distributed without registration with FINMA. Distribution to retail investors requires a registered foreign fund with a Swiss representative and paying agent.

The UCITS channel has come under pressure in the European Union. In June 2025 the European Securities and Markets Authority recommended to the European Commission that catastrophe bonds should no longer be treated as eligible assets for UCITS funds and should instead be held in funds under the framework for alternative investment funds. Plenum, which argued that the UCITS catastrophe bond segment held about USD 19 billion of assets and had operated without difficulty for more than a decade, urged the Commission in March 2026 not to adopt the recommendation.⁶ At the time of writing the Commission had not decided the question. For Zurich managers the issue is significant because a large part of their liquid business is organised in UCITS form. An adverse decision in Brussels would push them either towards European alternative fund structures or, conceivably, towards Swiss vehicles such as the L-QIF, which are not subject to European eligible asset rules.

Pension funds as buyers of catastrophe risk

The most important Swiss investors in the asset class are occupational pension funds. The ordinance on occupational pensions, known as BVV 2, expressly names insurance-linked securities among the alternative investments that pension funds may hold, together with hedge funds, private equity and commodities. Such investments must as a rule be made through diversified collective vehicles. A revision that took effect on 1 October 2020 created a separate category for infrastructure with a limit of 10 per cent of total assets, while leaving insurance-linked securities in the alternative bucket.⁷ The alternative category is subject to an overall limit under Article 55 BVV 2, which a pension fund may exceed if its investment regulations provide for an extension and it justifies the extension in its annual report.⁸

The experience of one pension fund shows how the asset class has been used. Nest, a collective foundation, reported insurance-linked and catastrophe bond investments of about CHF 154 million at the end of 2024, some 3.6 per cent of its assets, within a permitted ceiling of 5 per cent. The largest positions were a Swiss Re natural catastrophe fund and a catastrophe bond fund of Twelve Capital. The foundation earned about 22 per cent on this allocation in 2024, after about 5 per cent in 2023, and justified the investments by their low correlation with other asset classes.⁹ Returns of this size are unusual and follow years in which few large catastrophes hit the bonds in the portfolio. Because the history of the market includes years of sharp losses, a pension fund that invests in catastrophe risk has to explain to its board that the attraction of the asset lies precisely in its exposure to rare disasters. The legal duty of care under the pension legislation, which requires a pension fund to diversify its assets and to understand the risks it takes, applies here with particular force.

Notes

1. FINMA, “Managers of collective assets”, on the legal basis in Articles 24 et seq. FinIA and Articles 34 et seq. FinIO, the licensing requirement for managing collective investment schemes and occupational pension assets, the de minimis thresholds and the core licensing conditions, https://www.finma.ch/en/authorisation/asset-management/asset-managers-of-collective-investment-schemes/. ↩
2. Oberaufsichtskommission Berufliche Vorsorge (OAK BV), “Erläuterungen” to the directives on the admission of asset managers (2013), on Article 48f para. 3 BVV 2, under which only external persons and institutions subject to specialised financial market supervision (FINMA or an equivalent foreign authority) may be entrusted with the investment and management of pension assets, and on the OAK BV’s power under para. 4 to admit other qualified persons, https://www.oak-bv.admin.ch/inhalte/Zulassungen/Vermoegensverwalter/Erlaeuterungen_DE.pdf. ↩
3. Dominik Oberholzer (Kellerhals Carrard), “Switzerland: An Investment Funds Overview”, Chambers and Partners (2024), on the Swiss categories of securities funds, other funds for traditional and alternative investments and real estate funds, on the L-QIF and on distribution to qualified investors, https://chambers.com/content/item/6915. ↩
4. KPMG Switzerland, “Limited Qualified Investor Fund (L-QIF) factsheet”, on the entry into force on 1 March 2024, Articles 118a–118h CISA and 126c et seq. CISO, the absence of FINMA authorisation, the minimum of CHF 5 million, the custodian requirement, borrowing and commitment limits, and pension funds as eligible investors, https://assets.kpmg.com/content/dam/kpmg/ch/pdf/limited-qualified-investor-fund-factsheet.pdf. ↩
5. Artemis, “UCITS Catastrophe Bond Funds – assets under management”, on combined assets of more than USD 21 billion as of July 2026, the USD 20 billion milestone of February 2026 and the data support from Plenum Investments AG, https://www.artemis.bm/ucits-catastrophe-bond-fund-assets/. ↩
6. Artemis, “Plenum urges European Commission not to adopt ESMA’s UCITS cat bond recommendation” (31 March 2026), on ESMA’s June 2025 recommendation to exclude cat bonds from UCITS eligible assets and Plenum’s arguments, https://www.artemis.bm/news/plenum-european-commission-esma-ucits-catastrophe-bond-recommendation/. ↩
7. T+R AG, “Berufliche Vorsorge – Verordnungsänderungen per 1. Oktober 2020”, on the new infrastructure category with a 10 per cent limit in Article 55 BVV 2, the amended Article 53 and the continued treatment of hedge funds, private equity, insurance-linked securities and commodities as alternative investments to be held through diversified collective vehicles, https://t-r.ch/berufliche-vorsorge-verordnungsaenderungen-per-1-oktober-2020/. ↩
8. Amendment of the BVV 2, AS 2008, Article 55 (“15 Prozent: für alternative Anlagen”) and Article 50 para. 4 (extensions of the investment possibilities on the basis of the investment regulations), https://www.newsd.admin.ch/newsd/message/attachments/13141.pdf; Swiss Life, Anlagereglement der Sammelstiftung, Art. 3 para. 3, stating that an extension under Article 50 para. 4 BVV 2 is permissible where compliance with Article 50 paras. 1–3 is conclusively shown in the notes to the accounts, https://www.swisslife.ch/content/dam/ch/dokumente/de/unternehmen/nvs/stiftung/web1503_anlagereglement_bvsl_de.pdf. ↩
9. Artemis, “Swiss pension Nest gets 20%+ returns from ILS and cat bond investments in 2024”, on Nest Sammelstiftung’s CHF 154 million ILS allocation (3.6 per cent of assets, ceiling 5 per cent), its holdings in the Swiss Re Core Nat Cat Fund and the Twelve Cat Bond Fund, and returns of about 22 per cent in 2024 and 5 per cent in 2023, https://www.artemis.bm/news/swiss-pension-nest-gets-20-returns-from-ils-and-cat-bond-investments-in-2024/. ↩

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.