Dismissal of appeal against refusal of dividend distributions due to breach of duty to provide information and cooperate in the winding-up proceedings of an insurance company

Facts

The [A.] Ltd., a stock corporation with its registered office in [U.] , which conducts direct and reinsurance business (excluding life insurance), waived its licence to conduct insurance business in July 2014. In February 2015, the Swiss Financial Market Supervisory Authority (FINMA) approved the winding-up plan as well as the amended business plan of the company.

In the years 2016 to 2018, the [A.] Ltd. repeatedly applied to FINMA for approval of dividend distributions to the [B. AG] , which were partially approved subject to conditions. In June 2019, the company requested FINMA to qualify the portion of capital investments not required to cover insurance obligations as freely available assets and to adjust the winding-up and business plans. FINMA then repeatedly requested additional documents and information, in particular regarding the duration of the winding-up, insurance technical provisions and limitation periods. Despite repeated extensions of deadlines and threats of qualifying the lack of cooperation, the [A.] Ltd. did not submit the required documents in full.

With a ruling dated 14 August 2020, FINMA rejected all applications of the [A.] Ltd. due to breach of the duty to provide information and cooperate. The company appealed this decision to the Federal Administrative Court, which dismissed the appeal with a judgment dated 15 December 2023. The [A.] Ltd. then filed an appeal with the Federal Supreme Court on 9 February 2024, seeking the annulment of the Federal Administrative Court’s judgment and approval of dividend distributions of CHF 20 million for 2019 and CHF 5 million for 2020. In the alternative, it requested the annulment of the judgment and referral of the matter back to the lower court or to FINMA for reassessment.

FINMA requested the dismissal of the appeal. The appellant filed a reply on 18 April 2024. A request for suspension of proceedings filed by the appellant on 27 January 2025 was rejected by FINMA. The Federal Supreme Court admitted the appeal and dismissed it with a judgment dated 18 February 2025. Court costs of CHF 10,000.-- were imposed on the appellant.

Considerations

The Federal Supreme Court first examined the admissibility of the appeal. The appeal had been filed in due time and form, concerned a matter of public law and was directed against a final judgment of the Federal Administrative Court. The appellant was entitled to file the appeal, so the Federal Supreme Court admitted the appeal.

In examining the merits of the appeal, the Federal Supreme Court considered whether the lower court had correctly confirmed FINMA’s decision to refuse approval of the requested dividend distributions due to breach of the duty to provide information and cooperate. The subject matter of the dispute was exclusively the approval of the dividend distributions for the years 2019 and 2020. The appellant’s other requests (release of assets, adjustment of the winding-up and business plans) were no longer the subject of the proceedings.

The Federal Supreme Court confirmed that FINMA may take protective measures within the scope of its supervisory activities to protect the interests of policyholders. This applies in particular to insurance companies in run-off, where there is an increased risk of insolvency. FINMA has a broad discretionary power, which is however limited by the purpose of the law and the principle of proportionality. Protective measures do not require a breach of supervisory provisions; it is sufficient if the interests of policyholders appear to be at risk. In such a case, FINMA is even obliged to act.

The appellant argued that the lower court had applied a stricter standard of review than the requirements set out in Articles 8, 9, 16 and 17–19 IOA for active insurance companies. The Federal Supreme Court rejected this objection. While these provisions also apply to insurance companies in run-off, the special situation of a run-off company – in particular the absence of new business and the resulting uncertainty regarding future obligations – justifies the application of a stricter standard. FINMA may therefore impose additional requirements to safeguard the interests of policyholders. This is all the more true since the appellant had already made dividend distributions in the past and FINMA was entitled to examine compliance with supervisory requirements particularly carefully.

The appellant further argued that the lower court had violated its duty to cooperate in the administrative proceedings by requiring the submission of additional documents. The Federal Supreme Court confirmed,…