Solvency II and the equivalence decision of 2015

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The Swiss Solvency Test and the European Union’s Solvency II framework developed in parallel and influenced each other. The White Paper of 2004 already placed the SST within the emerging Solvency II architecture. Looking back, the Swiss Re historical account remarks that the Swiss model became a point of reference for the European Union.¹ Solvency II, adopted as Directive 2009/138/EC, applied from 1 January 2016 after repeated delays. It introduced market-consistent valuation, risk-based capital requirements, a governance pillar and harmonised public disclosure across the Union, while providing that third countries could be recognised as equivalent in three areas.

For Switzerland, equivalence mattered for three reasons. Swiss reinsurers wanted their contracts with European cedants to be treated like contracts with European reinsurers. Swiss insurance groups with European subsidiaries wanted their group supervision in Switzerland to be recognised. European groups with Swiss subsidiaries wanted to include those subsidiaries in their group calculation on the basis of the Swiss rules. The European Commission addressed all three points in Commission Delegated Decision (EU) 2015/1602 of 5 June 2015, adopted on the basis of Articles 172(2), 227(4) and 260(3) of Directive 2009/138/EC.²

The operative provisions are brief. From 1 January 2016, the Swiss solvency regime applicable to the reinsurance activities of undertakings with head offices in Switzerland is considered equivalent to Title I of the Directive. The Swiss solvency regime for insurance and reinsurance undertakings is considered equivalent to Chapter VI of Title I. Finally, the Swiss prudential regime for undertakings in a group is considered equivalent to Title III. The recitals give the reasons. The Commission found that FINMA had the powers to supervise insurance and reinsurance effectively, to impose sanctions, to revoke licences and to replace management, together with the necessary resources and expertise. It characterised the SST as based on sound economic principles with risk-based capital requirements covering quantifiable risks, while operational risks were treated qualitatively through the Swiss Quality Assessment. It also noted that reinsurance captives were covered by the Swiss solvency regime under the Supervision Ordinance.³

The equivalence decision is one of the most valuable intangible assets of the Zurich insurance centre. It allows Swiss Re, Zurich and the many reinsurance and specialty carriers established in Zurich to deal with European cedants and supervisors on the basis of mutual trust. It also explains why Swiss legislators, when revising insurance supervision law, regularly ask whether a proposed change could endanger equivalence. The regulatory impact assessment for the 2024 revision emphasised alignment with the Insurance Core Principles of the International Association of Insurance Supervisors and with Solvency II equivalence. The agreement of 1989 on direct non-life insurance was updated in 2018 to take account of the SST and Solvency II, a further sign that Swiss and European solvency regimes were now considered to rest on a common logic.⁴

Notes

1. Swiss Re, Geschichte der Versicherung in der Schweiz (cited above), pp. 35–36: “Inzwischen ist das Schweizer Modell zu einem Vorbild für die Europäische Union geworden.” ↩
2. Commission Delegated Decision (EU) 2015/1602 of 5 June 2015 on the equivalence of the solvency and prudential regime for insurance and reinsurance undertakings in force in Switzerland based on Articles 172(2), 227(4) and 260(3) of Directive 2009/138/EC, published in the Official Journal on 24 September 2015, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015D1602. The decision entered into force on 14 October 2015. ↩
3. Commission Delegated Decision (EU) 2015/1602 (cited above), Articles 1 to 3, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32015D1602, and the recitals on the powers of FINMA, the SST, the treatment of operational risk, professional secrecy and captives. ↩
4. EFD, Regulierungsfolgenabschätzung zur Änderung des Versicherungsaufsichtsgesetzes, Bern, 14 November 2018, https://www.newsd.admin.ch/newsd/message/attachments/54492.pdf. FDFA, Directorate for European Affairs, “Insurance” (cited above). ↩

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.