Where Disputes Start

Swiss insurance disputes most often begin with a disagreement about whether the reported event falls within the insured risk.

Further recurring issues include the scope of exclusions, causation, the valuation of loss, deductibles, policy limits and the allocation of cover across several policies and policy years. Late notification (Article 38 of the Insurance Contract Act (ICA)), pre-contractual non-disclosure or misrepresentation (Articles 4 and 6, ICA), and the handling or timing of a payment – which generally becomes due four weeks after the insurer has received sufficient information to satisfy itself as to the validity of the claim (Article 41, ICA) – can turn an otherwise manageable claim into a coverage dispute.

Swiss law requires exclusions to be specific and unambiguous (Article 33, ICA) and resolves genuine ambiguity in favour of the insured, making the drafting quality of policy conditions a frequent source of contention in itself.

Main Sectors or Lines of Business

Coverage disputes can arise across all lines of insurance. The main areas are:

• property and business interruption;
• motor and general liability;
• construction;
• professional indemnity;
• directors’ and officers’ cover; and
• health or accident insurance.

In liability work, the parties often debate the policy trigger – which may be structured on an occurrence or claims-made basis under Swiss law – the contractual duty to defend, defence costs and whether a loss is excluded because it was intentionally caused or otherwise falls outside the insurer’s liability under Article 14 of the ICA.

Reinsurance disputes follow a different pattern: the ICA does not apply to reinsurance, which is governed primarily by the Swiss Code of Obligations (CO) and the parties’ contractual arrangement, and disputes focus more on ceded risk, aggregation and attribution to policy years, attachment points and claims co-operation than on policyholder protection.

Recent Shift

The pattern has broadened as insured risks have become more interconnected and policies more layered and bespoke. Large losses increasingly involve several insurers, brokers, insured entities or jurisdictions, while cyber incidents, supply-chain disruption, sanctions and environmental contamination (notably PFAS) test traditional wordings.

The 2022 partial revision of the ICA introduced a general direct action right for injured third parties against liability insurers (Article 60, paragraph 1bis), adding a new dimension to dispute dynamics, particularly in directors’ and officers’ (D&O) and professional liability.

Interpretation of Insurance Contracts

Policy wording is central to Swiss coverage disputes. Swiss law does not operate under a strict doctrine of binding precedent, and the interpretation of each case therefore turns closely on the specific language agreed by the parties and the circumstances of the individual case.

Swiss law applies first a subjective interpretation approach asking for the true intention of the parties. Underwriting files, in particular any correspondence with the insured or its broker, are key evidence for alleged true intention. If such intention cannot be determined, the presumed intention of the parties must be established (objective interpretation). The policy is read as a whole, taking account of the parties’ knowledge, professional experience, negotiations and the involvement of an experienced broker. If, at this step, a decisive meaning of an exclusion is still not clear, the exclusion shall be interpreted in the way that is more favourable to the insured (Unklarheitsregel). This rule of ambiguity only applies subsidiarily if all other means of interpretation fail.

Recurring Clauses and Areas of Contention

Problems recur, for example, where policies import English-law labels such as “warranty” or “condition precedent”, in the English law meaning, without stating the intended legal consequence under Swiss law.

Under Article 45 of the ICA, a breach of an insured’s duty does not automatically defeat cover: depending on the applicable provision, the insured’s fault and the extent to which the breach affected the occurrence or extent of the loss may matter, so a label alone seldom provides a decisive defence.

Late-notice, co-operation and consent clauses are a regular source of contention, particularly where they do not address the consequences of partial compliance or of a breach that had no material effect on the occurrence or extent of the loss. Exclusions and endorsements that do not clearly identify the excluded event or conduct, or that sit uneasily with the policy’s definitions, sublimits, aggregation language and trigger, are other recurring problems. As policies become more layered and bespoke, the coherence of the programme as a whole is increasingly tested.

From Claim to Dispute

Most matters begin with notification, a coverage assessment and a payment decision or reservation of rights. The parties then test the position through written submissions, expert input and settlement discussions before commencing formal proceedings. Consumers and smaller businesses may turn to the Swiss Insurance Ombudsman, whose opinions are not legally binding but carry practical weight and can help resolve disputes without recourse to the courts. Conciliation and mediation offer further routes to resolve a dispute without a judgment.

Different Dispute Profiles

For consumers and smaller businesses, standard policy wordings, limited resources and the value of a prompt payment favour early resolution and careful claims handling. Commercial disputes more often involve brokers, negotiated programmes, several layers and technical evidence, making formal proceedings or a contractually agreed dispute-resolution process more likely when discussions stall.

Reinsurance and international disputes follow a different logic: the ICA does not govern reinsurance, specialised market practice plays a greater role, and confidential arbitration and, in some cases, expert determination are common for high-value claims.

Outcomes and Costs

Early resolution keeps costs manageable and preserves commercial relationships but depends on a clear and robust coverage position and a willingness on both sides to engage. Court proceedings in Switzerland are predominantly written, although oral hearings and oral evidence also play a role, and cost orders follow the loser-pays principle, although recoverable legal costs are often well below the actual fees incurred and are generally calculated under cantonal tariffs rather than on a full indemnity basis.

Arbitration offers confidentiality and procedural flexibility, and is particularly relevant in construction, financial institutions professional indemnity (FIPI), D&O, W&I and reinsurance matters. The choice of forum can materially influence both the procedural dynamics and the cost exposure, particularly in cross-border disputes involving several jurisdictions.

Party Autonomy and the PILA

Under the Swiss Federal Act on Private International Law (PILA), parties enjoy broad autonomy in choosing the governing law of their contracts (Article 116, PILA). The choice must be express or clearly result from the contract or its circumstances. This principle applies equally to insurance and reinsurance contracts. Where no choice of law has been made, the contract is governed by the law of the state with which it is most closely connected, which is presumed to be the habitual residence or establishment of the party effecting the characteristic performance – in insurance contracts, this is typically the insurer (Article 117, PILA).

Insurance

For commercial and industrial insurance, party autonomy is broadly respected in practice. Swiss law and English law are the most common choices in the Swiss market, depending on whether the programme is domestic or international. For consumer insurance qualifying as a consumer contract under Article 120 of the PILA, choice of law is excluded altogether: the contract is governed by the law of the consumer’s habitual residence, and that protection cannot be contracted away. Where Swiss law governs, the ICA is applied by default, along with its mandatory and semi-mandatory provisions, subject to the applicable rules on professional policyholders.

Reinsurance

Reinsurance contracts are not governed by the ICA and are governed primarily by the parties’ contractual arrangements, supplemented where relevant by the general provisions of the Swiss Code of Obligations (Article 101, ICA). Broad party autonomy applies without consumer protection restrictions. Swiss law and English law are common choices in the reinsurance market. Where Swiss law applies and the contract contains ambiguity or gaps, reinsurance custom and usage play an important role. The parties’ choice of governing law will generally be respected by Swiss courts and arbitral tribunals, subject to the applicable rules of Swiss private international law.

The Lugano Convention Framework

For cross-border insurance disputes involving parties domiciled in Lugano Convention states, jurisdiction is governed by the special insurance provisions of Articles 8–14 of the Lugano Convention. These rules are protective in nature: an insurer domiciled in a contracting state may be sued either at its own domicile or at the domicile of the policyholder, insured or beneficiary.

Jurisdiction agreements are subject to significant restrictions under Article 13 of the Lugano Convention: they are generally only enforceable if concluded after the dispute has arisen, or if they extend the policyholder’s forum options rather than restricting them. However, for certain large risks falling within Article 14, the parties may agree on jurisdiction with greater freedom. In practice, jurisdiction clauses selecting a Swiss forum are common in large-risk policies and are upheld where validly agreed.

Where a party is domiciled outside Lugano territory – including the United Kingdom since Brexit and the United States – jurisdiction falls back on the PILA, with the defendant’s Swiss domicile as the default forum (Article 2, PILA).

Domestic Practice and Sectors

In purely domestic disputes, jurisdiction clauses are widely used and generally respected within the limits of the Swiss Code of Civil Procedure. Where the statutory requirements are met – notably registration in the commercial register and an amount in dispute over CHF30,000 – insurance disputes involving corporate policyholders are frequently heard by cantonal commercial courts, where a canton has established one (Zurich, Berne, Aargau and St Gallen). The Commercial Court of the Canton of Zurich is a frequent forum, reflecting the fact that many of the larger insurers are domiciled in Zurich.

Lugano Convention Mechanisms

Within the Lugano framework, conflicts of jurisdiction are addressed through the lis pendens rule (Article 27), which requires a court subsequently seized to stay proceedings until the court first seized has established jurisdiction. Related actions may also be stayed, or the court may decline jurisdiction under certain circumstances, under Article 28. These mechanisms generally function well between Switzerland and other Lugano Convention states.

Choice of Law Conflicts

Choice of law follows the private international laws rules at the place of the forum. With a Swiss place of jurisdiction or arbitration, the PILA will govern the choice of law, allowing for commercial parties’ far-reaching autonomy. Difficulties may arise in international insurance programmes with different laws applicable to local policies and master policies, or excess policies following form but with different laws applicable to the primary policy, or losses spreading to several policy years with policies subject to different laws. In such cases courts will carefully analyse the specific case and seek the appropriate solution for that case.

Practical Challenges

The most significant practical challenges include service of proceedings abroad (governed, where applicable, by the Hague Service Convention) and the recognition and enforcement of foreign judgments, which is straightforward within Lugano Convention states but otherwise requires consideration of the applicable national rules, bilateral treaties or international conventions, including the relevant Hague Convention framework. In multi-layer or excess insurance programmes, different layers may be subject to different governing laws and fora, requiring careful co-ordination to avoid inconsistent outcomes.

No Anti-Suit or Anti-Arbitration Injunctions Under Swiss Law

Swiss courts, as civil law courts, do not issue anti-suit injunctions in the common law sense. There is no general procedural mechanism under Swiss law corresponding to the common law anti-suit injunction, by which a court orders a party to refrain from commencing or continuing proceedings before a foreign court.

By the same principle, Swiss courts generally do not grant anti-arbitration relief. In the same vein, the arbitral tribunal decides on its own jurisdiction under the competence-competence principle (Article 186, PILA).

Both reflect the fundamental civil law approach and international arbitration principle that each court or arbitral tribunal determines its own jurisdiction independently.

Protection and Practical Implications

Where an exclusive arbitration clause is in place, Swiss courts will decline jurisdiction, subject to the exceptions in Article 7 of the PILA. Arbitral tribunals seated in Switzerland have broad powers to grant interim relief and may, depending on the circumstances, consider measures aimed at preventing parallel proceedings, although anti-suit relief remains rare and its availability is not clearly established under Swiss law.

The absence of anti-suit relief is particularly relevant in reinsurance disputes, where parties may be tempted to initiate proceedings in multiple jurisdictions. Swiss market participants typically address this risk through carefully drafted exclusive jurisdiction or arbitration clauses and rely on the lis pendens rule of the Lugano Convention or contractual remedies for breach of forum agreements, rather than seeking injunctive relief against foreign proceedings.

No AI-Specific Rules

Swiss law does not currently contain AI-specific rules on jurisdiction or choice of law for disputes arising from AI systems. Courts therefore apply the general provisions of the Lugano Convention and the PILA.

Applicable Framework and Connecting Factors

Relevant connecting factors may include where the AI system is operated, the location of the data inputs, the place where the damage manifests, and the domicile of the developer or deployer. Jurisdiction in tort matters follows Article 129 of the PILA; the applicable law is determined under Articles 132 et seq of the PILA, with Article 135 providing specific connecting factors for product liability claims.

For contractual claims under insurance policies covering AI-related losses, the governing law of the policy applies as agreed by the parties, subject to the applicable PILA rules and mandatory provisions.

Regulatory Landscape and Outlook

Switzerland has no comprehensive AI legislation comparable to the EU AI Act, although a Swiss regulatory framework is under development, in particular to implement the Council of Europe’s AI Convention. The revised EU Product Liability Directive, adopted in 2024 and expressly extending liability to software and AI systems, does not apply directly in Switzerland but may influence future developments in Swiss product liability law and coverage disputes under product liability and technology errors and omissions policies. Increased AI deployment is likely to create further disputes over aggregation and over when and where an insured event occurred for coverage purposes.

Party Autonomy

Switzerland has a very liberal international arbitration law. Swiss law broadly permits arbitration in insurance and reinsurance contracts. International arbitration is governed by Chapter 12 of the PILA; domestic arbitration by Part 3 of the Swiss Civil Procedure Code (CPC). Disputes arising from insurance and reinsurance contracts qualify as arbitral under Article 177(1) of the PILA and Article 354 of the CPC. Article 178(1) of the PILA requires an arbitration agreement in writing or another text-evidenced form, including correspondence or electronic messages; Article 358 of the CPC takes a similar approach.

Validity and Referral

Article 178(2) of the PILA adopts the validation principle (in favorem validitatis): the arbitration clause is valid if it satisfies the law chosen by the parties, the law governing the subject matter of the dispute (in particular, the law governing the main contract), or Swiss law. Swiss courts interpret this rule broadly. Where a valid clause exists, a Swiss court declines jurisdiction and refers the parties to arbitration under Article 7 of the PILA.

Domestic and Swiss-Seated Awards

An award rendered in Switzerland, whether under Part 3 of the CPC or Chapter 12 of the PILA, is directly enforceable in Switzerland in essentially the same way as a court judgment. A party normally seeks a confirmation of enforceability from the competent cantonal court.

Foreign Awards

Switzerland has been a party to the New York Convention since 1965. Article 194 of the PILA directs the recognition and enforcement of foreign awards to that Convention, and Switzerland has made neither a reciprocity nor a commercial reservation. The usual route is an exequatur application, meaning a request to the competent cantonal court to recognise the award for enforcement. In practice, recognition is also often sought incidentally in debt enforcement proceedings, where the award creditor may request definitive Rechtsöffnung under Article 81(3) of the Debt Enforcement and Bankruptcy Act.

Narrow Grounds for Refusal

Article V of the New York Convention provides an exhaustive list of refusal grounds, applied restrictively by Swiss courts. Automatic suspensive effect of a remedy in the state of origin is insufficient under Article V(1)(e); a judicial suspension order is required.

Market Use

Arbitration is regularly an option for high-value policies, particularly international programmes or reinsurance contracts, but less common for standard domestic or consumer policies. It is particularly prevalent in reinsurance, FIPI, D&O, W&I, contractors’ and erection all risks (CAR/EAR) and international liability programmes, where large sums, technical evidence and several jurisdictions are involved. Arbitration clauses are often seen in the financial services sector.

Confidentiality

Swiss-seated arbitration proceedings are confidential.

Challenge

An arbitral award by a tribunal seated in Switzerland may be challenged only before the Swiss Federal Supreme Court on the narrow grounds in Article 190(2) of the PILA, including:

• lack of jurisdiction;
• an irregular tribunal;
• a decision beyond the submissions;
• serious due-process violations; or
• incompatibility with public policy.

There is no general appeal on the merits. Appeals in commercial arbitration are usually dismissed (success rate below 5%). If none of the parties is domiciled or seated in Switzerland, the right to appeal may be excluded by agreement of the parties under Article 192 of the PILA. For domestic awards, the CPC provides annulment proceedings and permits an appeal to a second arbitral tribunal; there is no general appeal on the merits.

A recent Federal Court decision concerned the interpretation of a master policy and the operation of prior-knowledge/claims-made provisions and potential coverage gaps when insurance policies are renewed. Coverage disputes in connection with the COVID-19 wave tested epidemic clauses and pandemic exclusions and whether successive government orders qualify as a single insured event. Cyber is another key emerging trend, for example new thread actors or the interplay between ransom payments and sanctions.

The Swiss legal landscape became increasingly litigious in the last five to ten years. Disputes that earlier were resolved by agreement or by a settlement after a first exchange of briefs are now more often pursued to court and to a final decision. This trend applies also in the insurance sector. In practice, this results in brokers and insureds taking more often a litigation-minded approach during the claims handling, increasing the complexity already during the claims handling for large-value claims.

The right of direct action introduced in 2022 is also showing effect and leading to the first claims by damaged parties against insurers. In particular in the area of D&O and in the event of bankruptcies, this may raise complexity because of the need to co-ordinate with the bankruptcy administration.

Interpretation of policy wordings follows the general rules for contract interpretations under Swiss law. Swiss courts start with the parties’ true intention and, if it cannot be proved, presumed intention assessed objectively (see 1.2 Role of Policy Wording and Drafting). They read the policy as a whole and may consider professional experience and broker involvement.

Article 33 of the ICA requires an exclusion of an individual event to be specific and unambiguous; the Unklarheitsregel applies only when other methods of interpretation leave a decisive uncertainty.

Under Article 45 of the ICA, denial or reduction for breach depends on the agreed term, but does not operate by law where the insured was not at fault or proves that the breach did not influence the event or the insurer’s performance. Calling a duty a “condition precedent” therefore does not replace analysis of the factual effect of non-compliance (see 1.2 Role of Policy Wording and Drafting regarding the import of English-law labels).

Technology Risks Remain Wording-Led

Cyber, AI and technology-failure claims are likely to be decided through ordinary contract, causation and trigger principles. Ransomware disputes may concern ransom, negotiation, forensic and restoration costs; business-email-compromise claims may turn on crime, funds-transfer fraud or cyber wording, social engineering and authentication controls. Data-recovery and business-interruption claims raise betterment, restoration, waiting-period, dependency and lost-profit issues, while incident-response and privacy claims require careful treatment of reasonable costs, sublimits, compensation, defence and regulatory penalties. Swiss law generally does not insure fines.

Coverage for cyber claims also often raises issues of pre-contractual non-disclosure or misrepresentation (Articles 4 and 6 of the ICA), for instance relating to the existence of MFA or patching of the systems.

Aggregation Contract-Driven

Swiss law does not provide for a rule dealing with aggregation. The wording of the concerned policy or policies are decisive, therefore, whether losses spanning several years are combined. This can be particularly relevant, for instance, where data protection issues create losses to individuals over different years, or where breaches of duties materialise over an extended period: eg, defective products or environmental pollutions (in particular PFAS).

Illegality Limits Recovery

Sanctions disputes raise two separate questions: whether the policy covers the loss and whether payment would be unlawful. The policy should be checked for sanctions, war, terrorism and criminality exclusions, as well as mandatory rules and the destination and purpose of payment. Under Article 14, paragraph 1 of the ICA, insurers are generally not liable for wilful acts, and wordings commonly exclude wilful or criminal conduct.

Fines, Penalties and Payment Restrictions

Swiss law generally treats fines and penalties as uninsurable; cover may be void and may expose the insurer to allegations of assisting an offence. Punitive damages are not available under Swiss law.

Under Article 41 of the ICA, payment is due no later than four weeks after the insurer receives the information needed to investigate and verify the claim. In particular, if differences between the parties materialise during claims handling about the information and documentation that has to be disclosed, it will be highly fact-specific whether a claim is due and since when. If liability is disputed, Article 41a of the ICA permits the person entitled to demand the undisputed amount after the same period. Late payment may attract interest at 5% per year and, if proved, additional loss caused by the delay. Punitive damages are not available under Swiss law.

Climate Risk Tests Existing Cover

Swiss courts are likely to approach ESG and climate disputes through familiar coverage questions rather than a distinct ESG doctrine. Regulatory requirements and client expectations may affect placement facts, the insured activity and the drafting of exclusions or endorsements. Important exposure will relate to defence cost coverage. The result will depend on wording, intention and evidence of loss. Relevant exposure will relate primarily to defence cost coverage for professional indemnity (PI) and D&O policies.

Disclosure, Exclusions and Endorsements

Insurers may separate physical damage, business interruption, liability, transition and reputational consequences through definitions, sublimits or exclusions.

Authority Must Be Matched by Evidence

The analysis turns on who represented whom and what authority was granted. A broker normally represents the policyholder in placing the risk; it is not thereby the insurer’s underwriting or claims agent. A managing general agency (MGA) or third-party administrator (TPA) with binding or claims authority may bind the insurer within that mandate, while authority limits and escalation requirements may be decisive. The policy, placement record, binding authority, claims mandate and communications should show who could bind the insurer, issue endorsements, decide cover, settle or reserve rights.

Mandates, Conduct and Reinsurance

Delegated arrangements exist particularly in international and specialist programmes, but conventional brokers and external adjusters under limited mandates remain common. Parties should verify the structure and Insurance Supervision Act (ISA)/Financial Market Supervisory Authority (FINMA) status. Swiss supervision distinguishes tied and untied intermediaries; untied intermediaries with a fiduciary relationship to policyholders must register, and intermediaries have information, training and continuing-education duties. An MGA or TPA does not by itself alter the insurer’s obligations, and a broker does not remove the need for precise questions and exclusions.

Increasing numbers of claims are being observed across several kinds of financial lines policies. In D&O policies, the increase is triggered first by the growing numbers of corporate insolvencies and restructurings since 2023. Swiss trustees commonly pursue directors under the specific statutory grounds of Articles 754 and 755 of the CO, which provide certain presumptions in the trustee’s favour. This dynamic is observable in claims pertaining to side A of the D&O cover, in instances where no corporate indemnification is available. Common denominators are increased standards of duties imposed on companies, reflecting on the duties of D&Os, and more financial pressure, which results in acceptance of higher risks. Thematic recurrences within the domain of policy triggers are the interplay of exclusions pertaining to the insured parties, conditions necessitating prior knowledge, and long-tail risks. D&O claims are also often seen when coverage under a crime or PI policy may not be available.

Warranty and indemnity (W&I) insurance is being used with increasing frequency in Swiss M&A transactions. This is in part due to rising insolvency rates affecting target companies, which has resulted in an increase in W&I claims relating to financial statement breaches, undisclosed liabilities, and tax exposures. The crux of coverage disputes lies in the interpretation of the scope of the seller’s warranties, the application of knowledge qualifiers, and the delineation between matters that have been disclosed and those that remained undisclosed.

Finally, there has been an important rise in cyber claims, with a multitude of different claim scenarios, spanning from the classical ransomware attack to business email compromise and social engineering.

Casualty coverage practice shows increasing judicial attention to the precise statutory/policy definition of insured perils, in particular where occurrences are distinguished from gradual deterioration, which may be construction-related, maintenance-related or insufficiently linked to one clear event.

As a more procedural point, note the possibility of third-party notice or third-party claims (Streitverkündungsklagen) where parties to the dispute may want to seek indemnity if a claim could fail or, alternatively, where a claim may later raise recourse or indemnity issues.

Apart from coverage, a second recurring cluster concerns how much is payable: repair cost, reconstruction cost, depreciation, estimates and the relationship between statutory valuation rules and actual reinstatement, which may be affected by the policy wording.

Principal Exposure Areas

Liability claims against insureds in Switzerland are concentrated in the following areas:

• general and product liability;
• professional indemnity;
• directors’ and officers’ (D&O) liability;
• construction and infrastructure losses;
• cyber and data-related claims; and
• (increasingly) environmental damage.

D&O claims frequently combine shareholder, insolvency and regulatory allegations, sometimes across several policy years and jurisdictions; professional liability disputes often involve substantial technical expert evidence and extensive documentary records. Motor vehicle liability remains a high-volume category under the strict liability regime of Article 58 of the Road Traffic Act (SVG) and the statutory direct action regime of Article 65 of the SVG. Construction losses regularly involve owners, contractors, subcontractors, designers and project managers, with multiple insurers responding to the same event under different policy histories. Cyber incidents, sanctions-related disputes and AI-related liability are emerging as further triggers.

Defence Costs and Insurer Involvement

Insurers most frequently fund defence costs under third-party liability, professional indemnity, D&O and cyber policies, subject to the policy terms and, typically, the insurer’s prior written consent. Since the partial revision of the ICA on 1 January 2022, the direct action right under Article 60(1bis) can bring insurers into disputes earlier, including in relation to counsel selection, settlement strategy and evidence preservation. Whether defence costs erode the indemnity limit depends on the policy wording and must be checked against the applicable sublimits, deductibles and aggregation provisions. Regulatory investigations may trigger defence cost cover where the policy provides such cover, particularly in D&O and financial institutions matters.

Environmental Claims as a Growing Watchpoint

PFAS contamination is emerging as a significant exposure: it may generate claims by municipalities, landowners, neighbours, employees or consumers for remediation, water-treatment costs, property damage or health effects. Swiss private law case law on PFAS remains limited, and source attribution, delayed manifestation and causation present serious evidential challenges. Those evidential issues make early scientific investigation and co-ordinated defence particularly important.

Shifting Risk Landscape

The central development is that claims against insureds increasingly turn not only on whether a loss event occurred, but also on how the insured designed, supervised and documented the systems and processes that produced it. A cyber incident or AI-related failure will often be the trigger, but the legal debate may quickly shift to governance questions: who was responsible for oversight, what controls were in place, and whether records are adequate to reconstruct the decision chain.

Swiss law addresses these disputes through existing contract, tort, professional duty and data protection principles rather than through a dedicated AI or technology statute. The EU AI Act does not apply in Switzerland but may influence the standards and compliance expectations relevant to internationally active Swiss companies.

Coverage and Defence Response

The consequence for insurers is earlier involvement and a broader co-ordination task. Given that a single technology or governance failure can generate civil claims, regulatory and/or criminal proceedings, internal investigations and reputational pressure simultaneously, multiple policy lines may respond, and coverage analysis must be addressed early alongside the defence strategy. Insurers may become involved from an early stage, funding incident response, forensic work and specialised counsel from the moment a potential claim emerges, rather than waiting for formal proceedings. For insureds, the practical priority is to preserve logs, governance records and decision trails from the first notice of an incident. A reliable record of the process followed can be important alongside the substantive merits of the underlying claim.

Where Costs Arise

Defence costs in Switzerland can be significant, driven in part by the growing complexity and increased need of co-ordination of disputes. Multi-party claims may involve the insured, claimants, contractors, directors and multiple insurers, each advancing different liability and limitation arguments across potentially overlapping policies and limits, often combined with parallel regulatory and/or criminal investigations. The direct action regime under Article 60, paragraph 1bis of the ICA can make early identification of the claimant population and potentially responsive policies more important. High-value or cross-border matters add further layers– technical experts, document preservation, document production or discovery, data protection constraints and parallel proceedings – all of which increase costs.

The Cost Gap

Switzerland operates a loser-pays system under Article 106 of the CPC, but recoverable party costs are determined by cantonal tariffs rather than by actual legal fees incurred. In practice, actual defence expenditure can substantially exceed tariff-based cost awards, so that even a successful insured bears a material share of its own costs. That structural gap affects settlement economics, the allocation of defence expenditure within a policy, and whether it is worthwhile to pursue costs orders against unsuccessful claimants.

Managing Complexity

The central challenge is co-ordination. Where several insurers or policy years may respond to the same claim, unco-ordinated defence activity can quickly drive costs beyond what any single insurer anticipated. Early appointment of lead counsel and a clear separation of liability, coverage and allocation workstreams reduce that risk. Policy wording determines the boundaries – in particular whether defence costs erode the indemnity limit and what consent or reasonableness requirements apply – so the cost framework should be mapped at first notice rather than after costs have already escalated.

Insurance Programme and Legal Expenses Cover

The first mechanism for managing litigation cost risk is the insurance programme itself. Swiss liability policies commonly cover reasonable and necessary defence costs for covered third-party claims, subject to deductibles, sublimits and prior consent requirements. Whether those costs erode the indemnity limit or sit outside it depends on the policy wording.

Separate legal expenses insurance is widely available and commonly used by private individuals and SMEs, typically subject to policy limits, exclusions for claims with no reasonable prospect of success and restrictions on the choice of lawyer. For larger commercial insureds, the primary liability policy and any excess or umbrella layers remain more important.

Third-Party Funding and Fee Structures

Third-party litigation funding is lawful in Switzerland and regularly seen, although not used every day. This is also because funders apply strict selection criteria; they typically look for both a high claim value and strong prospects of success before committing to fund a case. A funder pays lawyers’ fees, expert costs and court disbursements in return for a share of the recovery. The client and not the funder must retain informed control over litigation and settlement decisions, and counsel must preserve professional independence throughout.

Swiss law prohibits pure contingency fees under Article 12(e) of the Federal Act on the Free Movement of Lawyers (BGFA), although a success premium in addition to a genuine base fee may be permissible subject to certain conditions. The base fee must provide appropriate remuneration independently of the outcome, and the success-related component is subject to limits under Swiss case law.

Residual Cost Exposure

After-the-event insurance is not an established feature of the Swiss market. Where insurance and funding do not cover the full risk, early budgeting, staged expert instructions and mediation remain the principal tools for managing the remaining exposure.

Volume and Triage

AI-assisted drafting tools are increasing the number and speed of complaints reaching insurers. Although it is too early to quantify a Swiss-wide increase in meritorious claims, AI-assisted drafting of insureds seeking indemnification from insurers is clearly increasing the workload. Generative tools can turn a brief incident description into a detailed demand, translate submissions across languages and co-ordinate similar claims. The immediate effect may therefore be more repetitive or inflated demands rather than a proportionate increase in proven liability. For insurers, the principal difficulty is triage and authentication: an AI-produced statement may contain plausible but inaccurate facts, invented legal authorities, duplicated heads of loss or inconsistent supporting material.

Authentication and Evidence

Deepfakes and other manipulated documents, images, audio or video may create disputes about what occurred and who authorised it. Metadata, provenance, chain of custody and comparison with original system records can help identify manipulated material. Automated similarity checks and targeted requests for underlying records are useful, but blanket refusal based solely on the suspected use of AI is not a safe approach – human review remains necessary for coverage, causation, settlement and fraud decisions. There is currently no general Swiss law requirement to disclose the use of AI tools in preparing submissions, but regulated institutions using AI remain subject to applicable governance, risk-management and documentation requirements.

Insured-Side Risks

Insureds face parallel challenges when responding with automated tools. Claims, data protection, IT and defence teams should co-ordinate preservation, access and authentication protocols. A defensible record of why a claim was paid, challenged or investigated remains essential: AI can accelerate handling, but it does not remove the need to prove the insured event, loss, liability and causation.

Direct Action Rights Under the ICA

The partial revision of the ICA, effective 1 January 2022, introduced a general direct action right for injured third parties against liability insurers under indemnity insurance policies (Article 60, paragraph 1bis of the ICA). Previously, no such general right existed under the ICA; direct claims were limited to specific statutory regimes, most notably motor vehicle liability insurance (Article 65 of the SVG).

Scope and Limitations

The new direct action right is subject to the existence and limitations of the relevant insurance policy. The insurer may raise against the injured third party all defences and objections available under the law or the insurance contract, including coverage exclusions, sublimits, late notification and policy conditions. The right is purely compensatory and does not give rise to any punitive element.

Recent Case Law

In its decision of 27 January 2025 (BGE 151 III 35), the Swiss Federal Supreme Court held that Article 60, paragraph 1bis of the ICA does not apply retroactively to contracts concluded before 1 January 2022. Article 103a of the ICA is exhaustive and does not preserve the direct action for those contracts. This matters for long-tail policies written before 2022: the damaging event’s later date does not by itself create a direct action.

Common Areas of Application

Direct actions are established in motor liability and are increasingly relevant in professional liability and D&O insurance, subject to the policy and transitional rules.

Insurers’ interest in controlling counsel, settlement and costs may conflict with an insured’s need to protect its reputation and business relationships, especially in D&O proceedings and regulatory investigations.

Switzerland has no class- or group-action procedure comparable to the US model or the EU representative actions regimes (for example, in the Netherlands), but limited procedural co-ordination, consumer protection mechanisms and representative actions by associations can concentrate claims.

Indirect Geopolitical Exposure

Geopolitical developments affect Swiss insurance disputes mainly indirectly. The Russia–Ukraine conflict and the resulting Swiss sanctions regime have affected the availability of cover, the movement of premium and claim funds, and willingness to assume risks connected with affected jurisdictions.

Sanctions and Affected Lines

Switzerland is outside the EU and EEA and decides independently whether to adopt EU sanctions. Switzerland adopted EU sanctions against Russia from February 2022 under the Embargo Act (Embargogesetz, or EmbG), administered by the State Secretariat for Economic Affairs (SECO). The Federal Council has continued to align the Swiss sanctions regime with EU packages, most recently the 20th package adopted on 19 August 2026 and effective from 20 August 2026, covering asset freezes, financial services and goods trade. Disputes arise particularly in reinsurance, aviation, marine and cargo insurance and international liability programmes where several jurisdictions regulate the transaction. Middle Eastern instability and US–China trade tensions also affect political risk, D&O and professional indemnity.

Regulatory Framework

The framework rests on the Embargo Act, with SECO enforcing sanctions and FINMA supervising compliance structures at regulated entities. FINMA does not itself enforce sanctions but expects adequate compliance governance.

Under a standard sanction limitation and exclusion clause referring to UN, EU, UK and US sanctions, an insurer may decline to pay a claim where payment would expose it to foreign sanctions risk. A court would analyse such clause under Swiss contract-interpretation principles and not treat it as unusual or unenforceable. Depending on the wording, insurers may simply hold back a payment or clauses may also operate effectively as exclusions.

Claims-Handling Consequences

The practical difficulty is deciding when payment falls within sanctions, particularly for goods-related restrictions and indemnity, reinsurance or broker payments linked to sanctioned trade flows. FINMA’s Risk Monitor has highlighted the complexity of goods-related sanctions. Delays, suspended payments pending review and disputes over sanctions, limitation and exclusion clauses (SLECs) are becoming more common as insurers use dedicated sanctions-compliance teams to screen claims and track changes.

Operational Impact

The Ukraine Ordinance was last amended on 19 August 2026, so the position remains dynamic. Claims teams should record the legal basis for withholding or suspending payment and distinguish a prohibited payment from a covered loss whose remittance is temporarily blocked.

Current Judicial Position

Swiss courts have not directly interpreted war, terrorism or political-risk exclusions in the context of the Ukraine conflict or recent Middle Eastern hostilities.

Exclusion clauses – including references to “war”, “terrorist act” or “strike” – are interpreted under the standard Swiss contract methodology. An exclusion is not unusual merely because it restricts the scope of cover. Clearly worded war and terrorism exclusions will generally be upheld, provided they satisfy the specificity and unambiguity requirements of Article 33 of the ICA.

Market Response

Swiss law distinguishes war exclusions in standard commercial policies from affirmative political-risk products, which may cover expropriation or selective state obstruction. Insurers are refining war, terrorism and political-violence wordings to address hybrid threats and clarify the boundary between conventional war, cyber operations and state-sponsored disruption.

Policy Wording Remains Decisive

Supply-chain instability and energy-market volatility are of major impact also on the Swiss economy but have not yet produced a distinct body of Swiss case law on new insured-loss categories or aggregation.

Aggregation Questions

Whether disruptions arising from one sanctions regime or conflict are a single occurrence depends on the policy’s “occurrence” or “event” definition and applicable limits and sublimits. As already stated, Swiss law does not provide for default aggregation rules.

Practical Experience

The market has seen more enquiries and pre-litigation disputes about energy prices, raw-material shortages and delayed deliveries linked to sanctions or conflict. Most have been resolved through negotiation and claims adjustment rather than proceedings, which may explain the limited published case law.

Regulatory and Supervisory Pressure

Over the next 12 to 18 months, geopolitical uncertainty is likely to affect Swiss underwriting, wordings and disputes. Heightened macro-economic and geopolitical tensions and rising sanctions risks will keep influencing the market.

Expected Underwriting Changes

SLECs are likely to become more granular, reflecting multi-jurisdictional exposure. War, terrorism and political-violence wordings may be refined for hybrid threats, including state-sponsored cyber operations. Reinsurance capacity for geopolitically exposed risks may tighten, bringing higher retentions and more restrictive terms.

Dispute Outlook

Evolving sanctions, armed conflicts and fragile supply chains point to continuing geopolitically driven disputes. Claims teams and underwriters will need to co-ordinate earlier, preserve the rationale for payment decisions and test policy language against realistic cross-border scenarios before loss occurs.

Digital Concentration

Cyber, AI and digital concentration are closely connected. Traditional property, business-interruption, general liability, D&O and professional indemnity policies may respond to cyber or AI loss despite conventional assumptions, creating silent exposure. A major cloud or connectivity failure can affect many insureds, while AI-generated decisions or products may generate allegations against developers, users and D&O.

Climate and PFAS

Climate risk is entering ordinary liability, property and financial-lines work. PFAS is an emerging long-tail environmental exposure that may create disputes about coverage, causation and policy years.

Geopolitical and Infrastructure Risk

Geopolitical tension affects supply chains, trade credit, political risk, aviation, marine, property and contingent business interruption, particularly where sanctions or export controls interrupt performance or payment. Data centres and next-generation nuclear projects concentrate values and dependencies. Underwriters must assess common suppliers, power, cooling, connectivity, control systems and regulatory dependencies, not only the asset.

Dispute Prevention

Emerging-risk disputes usually begin with uncertainty about intended cover, aggregation, policy year, exclusion clarity and causation. Advisory work therefore focuses on sharper questions, scenario analysis, co-ordinated sublimits and exclusions, and early preservation of scientific, engineering and digital evidence.

ESG is increasingly a governance and underwriting issue. From the claims side, claims may allege that directors or advisers overstated transition plans, climate resilience or product characteristics. The issues are:

• accuracy;
• supporting evidence;
• consistency with internal risk processes;
• causation;
• reliance;
• loss measurement; and
• the distinction between regulatory concern, corporate loss and insured liability.

In the current soft market, there is a push for extending covers when renewing existing policies, that may seek to include or improve cover for ESG-related claims.

PFAS contamination may generate product, tort, premises and safety claims, but latency, multiple sources and uncertain scientific attribution remain obstacles; regulatory developments may revive older conduct. PFAS disputes may engage D&O, general liability, product liability and environmental policies across policy years.

Switzerland’s revised Federal Act on Data Protection (nDSG/FADP) has been in force since 1 September 2023, together with FINMA’s tightening cyber-risk supervision. FINMA’s supervisory reviews have exposed recurring deficiencies, which are also relevant outside the financial industries sector – unclear governance lines, inadequate identification of critical data, weak access controls and untested backup/recovery plans – that directly inform risk selection. Outsourcing is a particular focus: over half of reported cyber-attacks in 2022–23 involved outsourced services, and FINMA has made clear that responsibility cannot be delegated. Of interest for underwriters could be evidence of robust outsourcing governance, incident-response readiness and cross-border transfer compliance before placing cover.

The FADP’s Article 24 breach-notification obligation is triggered where a data security breach poses a “likely high risk” to personality or fundamental rights. The high-risk assessment, Federal Data Protection and Information Commissioner (FDPIC) notification and data-subject communications become more important when handling cyber incidents and claims. With their high cost potential, forensic IT-investigation and notification costs are emerging as significant coverage topics.

Switzerland’s National Risk Analysis 2025 models scenarios of multi-day power outages and prolonged electricity shortages, both of which could cripple data centre operations. Operationally, the increasing complexity of ICT systems – including legacy components, software defects, and inadequate maintenance – heightens outage risks. The growing concentration on a small number of cloud and infrastructure providers creates systemic vulnerability: an outage at one central provider could affect, for example, the entire Swiss financial market.

Insurers face underwriting challenges in accurately pricing these interconnected risks. Traditional property and business interruption policies must be adapted to address cascade failures and contingent business interruption arising from third-party provider outages. Cyber insurance is evolving to cover data breach and ransomware scenarios, though war exclusion clauses for state-sponsored attacks remain contentious. From a claims perspective, quantifying losses from prolonged outages – particularly consequential economic harm across multiple policyholders dependent on the same provider – poses substantial challenges.

Social media addiction and the associated mental health harm – particularly among young people – are developing. Attempting to determine what could be used as a basis for claims against social media platforms under Swiss law is highly problematic. From a tort law perspective, additional hurdles remain in proving adequate causation between platform use and psychological injury, and quantifying the damage suffered.

Swiss Starting Point

Switzerland’s nuclear-liability framework is the reference point for new technologies, although small modular reactors (SMRs) and fusion research remain in the early stages and have produced no domestic insurance case law. The Nuclear Energy Liability Act (KHG) imposes strict and unlimited operator liability, requires financial security including insurance, and gives injured persons a direct claim against the liability insurer. Demonstration projects and hybrid technologies may not fit every aspect of that regime.

Life-Cycle Exposure

Risks arise across the following:

• licensing;
• construction overruns;
• novel fuel or component supply chains;
• serial design defects across modular units;
• cyber vulnerabilities in control systems;
• operational interruption;
• decommissioning;
• waste; and
• long-latency injury.

Losses may also involve conventional engineering or professional failures with a nuclear cause.

Coverage Boundary

The mandatory nuclear regime operates alongside nuclear exclusions in standard commercial policies and specialised nuclear pools. Construction, professional liability and supply-chain risks require separate analysis during design, testing and commissioning. Disputes may concern whether technology falls within existing wording, whether the cause is nuclear or conventional, and how triggers and aggregation operate over long periods.

Market Response

International supply chains raise questions about designers, component suppliers, certification and allocation across jurisdictions. Insurers and brokers should review exclusions for novel technologies, identify cover during demonstration and testing, and map mandatory nuclear financial security against conventional insurance. Co-ordination is needed to avoid gaps or overlapping limits when one event affects operators, suppliers and project participants.

Conduct and Policyholder Protection

FINMA’s supervision of insurers is directed primarily at protecting policyholders and ensuring fair, transparent and well-governed conduct. Insurers are expected to provide clear pre-contractual information, apply precise underwriting questions and handle claims diligently. Since the revised ISA took effect on 1 January 2024, FINMA has directly supervised around 12,000 untied insurance intermediaries and has removed intermediaries from the register where requirements were not met. In supplementary health insurance, FINMA has intervened to ensure moderate premium adjustments and, in several cases, premium reductions.

These actions create dispute risk where renegotiation or remediation follows, although FINMA does not itself decide individual coverage disputes. It is repeated conduct or organisational weaknesses that trigger intervention, with consequences beyond the single case.

Operational Resilience and Emerging Risks

Cyber-risk and outsourcing concentration are classified as increasing principal risks; nearly half of reported attacks in 2025 targeted service providers rather than supervised institutions directly. FINMA expects robust crisis scenarios and appropriate monitoring of outsourced functions.

On artificial intelligence, Guidance 08/2024 sets out supervisory expectations regarding governance and risk management proportionate to the materiality of AI applications; claims handling is an observed use case. Climate- and nature-related financial risks are subject to growing scrutiny, with a new circular applying to insurers from 2026 in stages. In each area, opaque decision-making or weak oversight can make disputes harder to settle and may attract supervisory attention.

Civil Procedure and Collective Redress

The revised Swiss Civil Procedure Code took effect on 1 January 2025. The reform lowers procedural cost barriers, strengthens conciliation proceedings and simplifies procedural co-ordination of related claims. Cantons may now designate their commercial courts for international commercial disputes and provide for proceedings to be conducted in English.

Separately, a Federal Council proposal to expand collective redress – including representative actions for damages and collective settlements – was submitted to Parliament in December 2021 but has not yet been enacted.

For insurers, the procedural changes already in force, together with the direct action regime under the revised Insurance Contract Act, may increase early-stage defence and settlement costs, particularly in multi-party and cross-border disputes.

AI Regulation

In February 2025, the Federal Council instructed the Federal Department of Justice and Police (FDJP) to prepare a consultation draft for new AI rules by the end of 2026, with a view to implementing the Council of Europe’s AI Convention and creating the basis for its ratification. The legislation is expected to address transparency, data protection, non-discrimination and oversight. While not insurance-specific, it may affect underwriting algorithms, claims-handling automation and coverage decisions that rely on AI.

FINMA has already set out technology-neutral governance expectations for AI use by supervised institutions (Guidance 08/2024), but the planned federal legislation would go further by introducing binding obligations with a broader scope of application.

Nature-Related Financial Risks and Intermediary Regulation

FINMA’s Circular 2026/1 on nature-related financial risks entered into force on 1 January 2026, setting supervisory expectations for insurers to identify, assess and manage material climate- and nature-related financial risks. The circular applies in stages: initially to climate-related financial risks from 2026 and to all nature-related financial risks from 2028. These developments may influence policy wordings where climate-risk assumptions feed into pricing, exclusions or reserving, but the outlook is incremental guidance rather than a new insurance contract code.