Study: Swiss surety market

The study shows that awareness and rating are important factors in the choice of a particular guarantee and surety provider.

The Swiss surety market consists of banking and insurance markets, whereby the relationship with the bank is traditionally strongly anchored in Switzerland and enjoys broad acceptance. However, companies are increasingly turning to insurance companies as guarantors because they are more flexible in terms of conditions and contract design/wording, which is becoming more and more important. Internationally, the surety market is also dominated by banks in most countries, but insurers are increasingly emerging as competitive providers.

SML expects that increasing regulations such as Basel III and Solvency II will change the framework conditions for guarantees. As Solvency II will have a less serious impact on the insurance market, corresponding insurance solutions could become more attractive in the long term.

Compliance specifications with guarantees

In the course of 15 qualitative interviews with leading companies in the machinery, electrical and metal industry, SML found that internal group guidelines, such as compliance requirements, increasingly stipulate guarantees and sureties for certain transactions. Particularly in the supply industry, maintenance, retail trade and to some extent also in the capital goods industry, it is primarily the clients who demand a hedging instrument such as a guarantee or surety.

The study also shows that guarantees are mandatory above a certain project size. This is particularly true for large projects in the areas of infrastructure, energy and capital goods. Furthermore, international groups are more dependent on guarantees, whether because of internal guidelines, compliance requirements or because they are new customers with whom a relationship of trust must first be established. Therefore, the SML as well as the interviewed companies assume that the need for hedging instruments will tend to increase. However, guarantees represent a not insignificant cost item for Swiss companies.

Ratings important for clients

The study shows that awareness and rating are important factors in the choice of a particular guarantee and surety provider. Uncomplicated online conclusion and management solutions are just as much in demand as speed and completeness of the offer. Not to be forgotten, in addition to experience and expertise in consulting, is personal contact, which is highly valued.

Growth market with potential

According to SML, the surety market has grown steadily at around +6% between 2011 and 2014. Overall, 50% of the market is dominated by rental and construction bonds. Demand for surety bonds is highly dependent on the industry in question. SML expects that the increasing export orientation of Swiss SMEs will give a boost to the surety market.

To the complete study under this Link