


                             THE SWISS INSURANCE INDUSTRY

                    Insurance companies belong to one of the most
               important sectors of the economy in Switzerland.  It is
               also extremely conservative and safe.  In 130 years
               none have failed, a record that even Swiss banks cannot
               match.  Unique tax advantages combined with
               conservative money management cause Swiss insurance
               products to perform much better than one might expect.
               Conservative does not have to mean low returns.  (If
               the insurance company doesn't have to deduct losses on
               a lot of bad investments, it is much easier to maintain
               a conservative, safe, high return.)
                    Swiss government insurance company regulation
               keeps investment portfolios at a nearly no risk level.
                    Liquidity and valuation of investments are ultra-
               conservative.  Only a maximum of 30% of investible
               funds may be put in real estate.  Swiss real estate has
               always held the highest values, but this is ultra-
               conservatism at work.  If it should go down, it might
               not be liquid enough to cover claims -- so let's be
               ultra-conservative and severely limit the exposure.  A
               philosophy that a lot of American banks and insurance
               companies are probably now wishing they had followed --
               or at least their policyholders are wishing they had.
                    Then just in case this isn't enough, Swiss
               insurance companies often carry their real estate
               holdings at less than half their present market value,
               allowing a very wide margin of price changes before
               safety can possibly be affected.
                    Swiss accounting in general seems to be on the
               conservative side.  Companies tend to have hidden
               reserves of millions, rather than the North American
               style of overvaluing assets to achieve a high stock
               market price for takeover bids.  This conservatism
               applies all the more to the insurance industry.
                    The Swiss insurance companies offer a greater
               range of services than the American investor is used
               to.  In fact, the range is broader than that offered by
               most Swiss banks.  There are only about 20 insurance
               companies in Switzerland.  This concentration makes the
               industry stronger, and easier to supervise, than the
               thousands of American insurance companies.  There are
               no weak insurance companies in Switzerland, unlike the
               United States were insurance laws in many states permit
               an insurance company to be formed with capital as low
               as $100,000, and licensed, empty insurance company
               shells are frequently sold in classified ads in The
               Wall Street Journal and other newspapers.
                    The industry is regulated by the Swiss Federal
               Bureau of Private Insurance -- a very strict regulator.
                    There is no rate competition -- the emphasis is on
               maintaining the strength of the insurer, and
               prohibiting risky investments (although it is unlikely
               that a Swiss insurance manager would even think of
               making a risky investment).
                    Regulation of private insurance companies has been
               established by a clause in the Swiss federal
               constitution since 1885.  Contrast this to the United
               States where insurance companies are often regulated
               only by rules promulgated by a politically appointed
               insurance commissioner, who expects to be employed by
               an insurance company when the governor who appointed
               him is retired in a few years.
