The reinsurer helps the direct insurer fulfil the obligations in the form of claims payments arising from the insurance contracts. The need of the direct insurer for this relief is a result of the specific nature of the actuarial risk it bears, which consists in unforeseeable fluctuations of the claims history, potential structural changes of the risk situation, and the threat of accumulations and catastrophic events.
About 70 reinsurance institutions are subject to supervision by FOPI, approximately a dozen of which are professional reinsurers; the rest are reinsurance captives. The gross reinsurance receipts in Switzerland in 2004 amounted to about 34.8 thousand million Swiss francs, i.e., about one third of the total premium volume generated in Switzerland.
Already under the old ISL, reinsurance companies were subject to supervision. However, some of the provisions differed considerably from those for direct insurers. Under the new ISL, reinsurers are subject to the same provisions shaped by the new supervision philosophy that also apply to direct insurers. With the new ISL and especially with the new Supervision Ordinance, reinsurers must fulfil new solvency requirements. These requirements are calculated according to two methods: First, the reinsurers must maintain available own funds in the amount of the required solvency margin, which depends on the business volume (Solvency 1). Second, the reinsurers must also conduct the Swiss Solvency Test, SST (Solvency 2).