I can tell you with 100% confidence this means they are porting the PS3/X360 version (on the ignite or an older engine) or possibly Wii U version of the game to Switch. They modified an older engine to work on Switch, that's what's "custom" about it. If they used the PS4/X1 version running on frostbite, and customized that for Switch, they'd say it was a "Custom Frostbite Engine". They'd barely be able to contain how they got the PS4/X1 version running on Switch so they could hype how much of a console-like experience you'd be getting on a handheld.
And I don't necessarily blame them or think they're lazy for doing so. Porting console games to compatibly weak hardware is the hardest thing I did making video games. Having an engine that runs well on the system from the get-go makes everyone's life a whole lot easier. That's not to say that the Switch isn't capable of running a modified PS4/X1 version, and that may come in time. I'm just saying this was their best chance of making the most polished game possible for their first foray onto Switch.