Swiss federal authorities froze Libyan leader Colonel Muammar Gaddafi’s assets earlier this year, merely weeks after freezing those of erstwhile Egyptian president Hosni Mubarak. The country may be also in the process of slowly opening up its secretive banking system with a new ‘withholding tax’. 

This clampdown is indicative of a country that has also improved its public relations profile by liberalising its business regime. One industry which has benefited from this deregulation has been the insurance and reinsurance industry, and consequently a number of its players have been attracted to the landlocked European country.

Duvalier Law

Last year, Switzerland introduced a new law (known as ‘Duvalier Law’ because it emerged out of a long battle between the Swiss authorities and the family of Jean-Claude Duvalier over the former dictator of Haiti’s financial assets) that allows it to freeze, and potentially confiscate, the assets of a ‘politically exposed person’. 

Then the country announced it would also start negotiations on a ‘withholding tax’ agreement with Germany and the UK, whereby the Swiss government could tax foreigners’ bank accounts without them losing their anonymity. 

The legislation is part of a slow, liberalising trend which started several years ago in response to concerns over competitiveness and international pressures. Foreign companies were to be allowed to set up branches and then head offices in Switzerland. In the country's insurance industry, tariffs against writing certain types of business were gradually abolished. 

The charge of the insurance companies

Insurers and reinsurers answered the call: Liberty Mutual opened up an office in 2004, ACE, one of the largest such groups in the world, came to Zurich in 2008; then came HCC Insurance which also acquired a licence in the city, as did Amlin. In December 2010, Catlin announced it would locate a reinsurance company in the country. 

Aspen, the global insurer and reinsurer, got approval from the Swiss regulators in November 2010 to open a fully licensed non-life direct insurance branch in Zurich in addition to its existing reinsurance unit, underwriting a range of risks. Heinz Eggenberger, general manager of Aspen’s direct insurance operation in Switzerland and also president of the Insurance Institute of Switzerland, explains why the country is an attractive option: “Switzerland has a highly professional regulator who is sincere and not a ‘business blocker’. The country has a highly professional and multilingual workforce. Added to that, Switzerland is centrally located within Europe.”

London under pressure?

Such is the intensity of this migration towards Switzerland that it has been argued it could affect the attractiveness of the London insurance market. At the beginning of the year, chief executive of Lloyd’s, Richard Ward, caused a storm by telling Reuters that “people are seeing Switzerland as a safer haven than they ever have before”.  

Recent research by chartered accountants Grant Thornton found that for insurance and reinsurance companies, when selecting a domicile, access to markets is still the “key criterion” and this is why London remains a “key location”. Mr Eggenberger says that Aspen did not disqualify other ports of entry into the continental European market but “it was just a positive choice for Switzerland".