A “revolutionary solution” in the provident fund market. It is under this tempting qualifier that Pax, a Basel insurance cooperative, is now offering a combination of the two current worlds of pension provision. Companies today have the choice between the full insurance model, with its 100% guarantee of investment risks, and semi-autonomous insurance, which makes the insureds bear the savings risks. The independent Basel insurer, with some 340 employees, is breaking this separation by marketing its new solution called Duostar. “No similar solution exists on the Swiss market”, declares to the Time Andreas Kiry, spokesperson for Pax.
Pax, with around CHF 450 million in premium income from group life insurance in 2020, has the vision of being “the best provident insurer in Switzerland”. It hopes to achieve this goal by building on its cooperative values such as safety and customer needs. By launching Duostar, the Basel is not leaving full insurance as several other insurers have done, including Axa in 2019. It remains faithful to its basic strategy, but it intends to “combine the best of both worlds”, declares in an interview Yvonne Häring, member of the management of Pax. Concretely, savings contributions and retirement assets are divided into two equal parts, one half with 100% guarantee and the other based on yield, says Andreas Kiry.
The combination of the two models differs from the single full insurance model by lower premiums and greater potential returns in a time of extremely low interest rates. The premiums are indeed 24% cheaper than for the full warranty model. As the reduction allowed by Duostar relates to half of the equity, the reduction is therefore 12%.
Compared to a purely semi-autonomous solution, Duostar offers increased security since 50% of retirement assets are 100% guaranteed at all times. Pax then speaks of “total guarantee level for 50% of savings”.
Thus, half of savings contributions and retirement assets benefit from full insurance. The other half is invested in search of a higher return, since the investment strategy is riskier than with a 100% guarantee. For the “opportunity” part, bonds represent, for example, 9% of the portfolio, equities 45%, real estate 30%. For the “security” component, the portion of bonds amounts to 55% and that of equities to 5%, real estate 15%.
New customer segment
For Yvonne Häring, Pax “does not offer a new product, but a provident solution” which thus makes it possible to increase the range of choices in providence, while respecting the possibilities offered by the regulations of the 2nd pillar.
The ambition of the management is to open up new customer segments, through those who “would like not to leave entirely the world of a total guarantee for the savings part but who would like a higher return”. The insurer is also aimed at companies who appreciate the performance of semi-autonomous solutions but who want more security. “The added value lies in the balance between the combination of safety and performance,” says Yvonne Häring. It does not target a particular segment in terms of branches of activity, linguistic region or size, but a balanced risk profile.
The need is real, especially for companies that do not have the capacity to bear savings risk, she adds. Depending on the business model, the goal is not to move current clients from the full insurance model to Duostar, but to find new ones, ideally between 80 and 100 institutions.