World reinsurance large Swiss Re has determined to considerably cut back its actions in Israel. After doing this within the pension sector, the corporate reported in early December in a presentation to traders that in 2025, it had taken actions that primarily concerned exiting its areas of exercise in medical insurance and incapacity and work capability loss insurance coverage, a transfer that the corporate itself defines as a “run-off” – self-liquidation, through which it doesn’t present reinsurance for brand new and previous insurance policies which can be operating down.
A reinsurer is an insurance coverage firm that takes on a part of the chance of the native insurance coverage firm, in trade for a payment. On this manner, the native insurance coverage firm reduces its threat and might direct capital to extra actions. If an excessive occasion happens, each firms take in the harm.
Swiss Re suffers losses – the Capital Market, Insurance coverage and Financial savings Authority doesn’t need the general public in Israel to pay for it
From Swiss Re’s perspective, it’s experiencing regulatory uncertainty relating to the prices it must pay to insured purchasers within the well being sector, the place it’s compelled to soak up losses, with the emphasis on medication exterior the federal government funded drug basket, which have gotten costlier. These medication extend life and should be paid for over an extended time period, and on the similar time, sufferers are extra simply authorized to obtain these costly medication, which may price hundreds of thousands of shekels.
Market sources say, “There isn’t any insurance coverage firm that has not raised the priority in regards to the reinsurer leaving Israel with the regulator, the Capital Market, Insurance coverage and Financial savings Authority, within the final two years. The regulator just isn’t responding and Swiss Re merely threw up its palms and stated that it’s not keen to tackle the chance.”
Nonetheless, the query is extra advanced. The dilemma going through the Capital Market Commissioner Amit Gal, is whether or not to permit Swiss Re to extend costs by important percentages. In keeping with market sources, this implies a value that might attain billions of shekels a yr that can fall on the buyer – that’s, it should enhance the premium for the general public – or that the reinsurer will cut back its exercise in Israel. Plainly the Capital Market, Insurance coverage and Financial savings Authority was not satisfied that preserving the big reinsurer justifies the rise in costs for the general public. On the similar time, it needs to be remembered that a minimum of for now, native insurance coverage firms are usually not dropping cash within the well being sector, to allow them to “handle” even with out the reinsurer.
Nonetheless, Israeli insurance coverage firms have been involved and have been warning for a while that what occurred within the discipline of nursing care insurance coverage, the exit of Israeli insurance coverage firms from the sector, may be repeated in drug insurance coverage, if the Capital Market Insurance coverage and Financial savings Authority doesn’t enable premiums to be raised.
There are these out there who’re making an attempt to downplay the scenario and stressing that that is neither a brand new downside nor a dramatic improvement. In keeping with a senior trade official, “This can be a pattern that has existed for a few years. Reinsurers have exited many areas in Israel that contain dangers, akin to obligatory automotive insurance coverage, however this has not meant that there isn’t a obligatory insurance coverage in Israel.” The supply provides, “Swiss Re has not been lively within the well being sector for a very long time, however primarily helps previous insurance policies. They don’t seem to be exiting utterly however are lowering their exercise.”
How dramatic an occasion is that this?
One truth is indeniable. Swiss Re is the most important reinsurer working in Israel, and by a big margin from different firms. “They’re the principle reinsurer within the well being sector in Israel, the market depends on them. Their exit is unhealthy information and I do not know if anybody else will step into their footwear,” a market official emphasizes.
The big insurance coverage firms say that this could not have an effect on them, a minimum of not at first. “The insurance policies we market right this moment don’t have anything to do with Swiss Re. They’re in our previous insurance policies and they aren’t popping out of there,” says a supply at one of many massive firms. A supply at one other massive firm claims that “to our understanding, there isn’t a dramatic influence.”
Then again, the market supply explains that a minimum of within the first stage, the transfer is predicted to have an effect on primarily the smaller firms lively within the trade, akin to Direct Insurance coverage, Ayalon, and AIG. However this will likely additionally translate into greater premiums that the complete Israeli public pays.
In keeping with the supply, insurance coverage firms will now need to tie up extra capital, and tackle extra dangers, and will be unable to launch it for different actions, which may result in greater costs for insurance policies for the general public. Nonetheless, this won’t occur within the instant time period, for the reason that worth enhance would require approval from the Capital Market, Insurance coverage and Financial savings Authority.
The supply describes one other concern. In keeping with him, there’s a threat of hurt to competitors, as “The flexibility of small firms, which have to tie up their capital, to compete and enter such areas tends to zero. Small firms could have a really nice issue in opposition to the big firms.” It needs to be famous that Israel just isn’t the one nation through which Swiss Re has determined to scale back exercise. It is usually doing so in Australia within the discipline of disabilities, and in South Korea within the discipline of well being, however it appears that evidently the exit from Israel is probably the most important motion taken by the reinsurer this yr.
Printed by Globes, Israel enterprise information – en.globes.co.il – on December 31, 2025.
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