Inflation: a double-edged sword for insurers

Following a surge in 2022 and 2023 triggered by the economic recovery from the COVID-19 pandemic, inflation in Switzerland has eased significantly again. At the time, the Swiss National Bank (SNB) raised key interest rates to combat inflation; since early 2025, inflation has been close to zero. Although it rose slightly in 2026 due to the uptick in energy prices, it is likely to remain within the price stability range, at an average of 0.6 per cent. This means that Switzerland remains in a low-inflation environment

For non-life insurers in particular, the price increases of previous years had a direct impact: Higher spare-parts and construction costs led to higher claims and additional provisions. Some of these effects are still having an impact, even if the current inflation rate is minimal.

Cost increases passed on after a delay

Insurers cannot offset increased expenditure directly on the revenue side, as premiums can only be adjusted after a delay. In addition, there is intense competition in many sectors. Cost increases cannot be passed on to customers without consequences. Competition has led to a tendency for non-life insurance premiums to fall in recent years. According to the Swiss Consumer Price Index, insurance products cost an average of 8.9 per cent less in 2024 than ten years ago.

One example of this trend is motor vehicle insurance, which fell by 17 per cent compared with 2014. Over the same period, prices for vehicle spare parts and accessories increased by 5.9 per cent. Replacing furnishings and floor coverings in 2024 cost 5.6 per cent more than a decade ago. In other words, insurers feel the impact of inflation if a garage owner charges a higher price for a more expensive replacement part or if it costs more to replace a window after a storm.

In view of rising claims costs, premiums are currently expected to rise. However, intense competition sets clear limits on premium increases. Insurers must therefore set themselves apart from their competitors by offering differentiated products and services.

The interest rate environment remains challenging

Along with claims costs, the interest rate environment remains an important influencing factor for the insurance industry. After a brief period of moderate interest rates, Switzerland has returned to a zero-interest rate environment since mid-2025. The SNB base rate is still 0 per cent, while the 10-year Swiss yield is around 0.44 per cent (as of 7 August 2026). This reduces the potential return on the investment side and makes it more difficult to obtain guaranteed interest in life insurance. If inflation and interest rates remain low for an extended period, this could further dampen demand for traditional life insurance products.

Solvency ratio as proof of resilience

A renewed prolonged period of low interest rates would also pose a challenge for insurers’ investment activities. However, Swiss private insurance has a strong capital base and risk-appropriate investment strategies. At an average of 246 per cent, the solvency ratio as of 31 December 2024 was well above the 100 per cent required by law.