Swiss solvency test

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The Swiss Solvency Test is a means to the risk -bearing capacity of insurance companies in Switzerland to quantify and regulate. The actual risk is expressed by the target capital ratio (ZK). The available capital is the risk-bearing capital (RTK). The regulatory requirement is that the risk-bearing capital must be greater than or equal to the target capital: RTK ≥ ZK.

The Swiss solvency test corresponds to the Solvency II supervisory regime that has been in force in the EU since 2016 .

Customary models of the risk, i.e. the target capital, as they are currently implemented by insurance companies, are based on Monte Carlo simulations of the annual income or the potential annual loss of profits or losses. So “Earning at Risk” is used as a type of risk measurement. In addition to the potential losses from the core business, potential losses from credit risk (e.g. failure of reinsurers) and operational risk (e.g. failure of the IT infrastructure) are also modeled within the scope of these simulations. The consideration of risks beyond the core business and the corresponding requirement to back these risks with equity capital is at the same time the actual innovation that results from Solvency II for insurance companies. Credit risk and operational risk did not previously have to be factored into regulatory capital.

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