Client suitability appropriateness under the Insurance Supervision Act (IAS)

loi surveillance des assurances


The Insurance Oversight Act (IAO) or Insurance Supervision Act (IAS) regulates the supervision of insurance undertakings and insurance intermediaries. It is called Loi sur la surveillance des assurances (LSA) in French and Versicherungsaufsichtsgesetzes (VAG) in German.

On 21 October 2020, the Federal Council revised the Insurance Oversight Act (IOA) to make it in particular more aligned with the Financial Services Act (FinSA). In was approved in 2021.

This includes the introduction of a new insolvency restructuring regime customer categorization which reflects the protections required for customers and new regulations for business practices affecting insurers and intermediaries.

It provides also new guidelines about how to assess client’s suitability and appropriateness when delivering investment advice.

Client segmentation under Insurance Oversight Act (IAO)

The current legislation only distinguishes between insurers in direct insurance business with higher levels of regulation and insurers in reinsurance business with lower levels of regulation and supervision.

With the revision of the IAO and in line with the FinSA (Swiss Financial Services Act), a customer categorization is introduced.

Insurance companies should be able to benefit from supervisory simplifications if they only serve professional clients (e.g. large companies with no particular need for protection) or the captive business.

Client appropriateness assessment under Insurance Oversight Act (IAO)

In line with the FinSA, the new version of the Insurance Oversight Act will make it compulsory for insurance undertakings to assess their clients’ appropriateness in case of financial advice.

Appropriateness assessment refers to the assessment of the client’s financial knowledge and expertise.

If the advisor estimates than the financial instrument is not appropriate with the client’s profile, he recommends to the client not to invest in such products.

An insurance undertaking and insurance intermediary should document what qualified life insurance contract has been concluded, which knowledge and experience of the insured has been gathered

If the client refuses to provide this information, the financial instrument cannot be recommended.

This assessment should be updated frequently.

This new requirement will not apply if:

  • There is no risk of loss associated with the financial product.
  • There is no advice provided for the investment in the financial product.

On top of these requirements, basic information about the financial instrument (risk, key features, costs…) will have to be provided to the clients (art. 39b P-LSA).

What is next?

The revised Insurance Oversight Act (IAO) should enter into force in 2022.