Risk assessment
In 2017, our overall risk remained broadly stable, as an increase in insurance risk was largely offset by lower financial market and credit risk.
Swiss Re’s internal risk model was approved by FINMA in November 2017. The model is used to measure the Group’s risk position and related capital requirements as well as for defining the risk tolerance, risk limits, and liquidity stress tests.
Based on the internal risk model, our overall risk in terms of 99% tail value at risk (tail VaR) remained broadly stable at USD 19.7 billion in 2017 (compared to USD 19.5 billion at the end of 2016).
Alternative risk measurements — 99% and 99.5% VaR — remained stable at USD 14.6 billion and USD 17.4 billion, respectively.
The Group capital requirement table below shows the 99% tail VaR on a standalone basis for each of Swiss Re’s core risk categories:
- Property and casualty risk increased by 5% to USD 9.8 billion, mainly due to the strengthening of major currencies against the US dollar and higher reserve exposure following the 2017 natural catastrophe events.
- Life and health risk increased by 4% to USD 7.7 billion, driven mainly by the strengthening of major currencies against the US dollar and lower interest rates, as well as higher lethal pandemic and critical illness exposure.
- Financial market risk decreased by 3% to USD 11.9 billion; this was mainly driven by lower credit spread risk reflecting the minority investment of MS&AD Insurance Group Holdings Inc (MS&AD) into ReAssure.
- Credit risk decreased by 3% to USD 3.3 billion; an important driver of the change was the minority investment of MS&AD into ReAssure.
Group capital requirement based on one-year 99% tail VAR
| Download |
in USD billions, |
2016 |
2017 |
Change in % |
cross reference information |
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Property & Casualty |
9.4 |
9.8 |
5 |
see Insurance risk |
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Life & Health |
7.4 |
7.7 |
4 |
see Insurance risk |
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Financial market |
12.3 |
11.9 |
–3 |
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Credit1 |
3.4 |
3.3 |
–3 |
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Simple sum |
32.5 |
32.7 |
1 |
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Diversification effect |
–12.9 |
–13.0 |
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|
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Swiss Re Group |
19.5 |
19.7 |
1 |
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Our internal risk model takes account of the accumulation and diversification between individual risks. The effect of diversification at the category level is demonstrated in the table above, which represents the difference between the Group 99% tail VaR and the sum of standalone tail VaR amounts in the individual risk categories. The extent of diversification is largely determined by the selected level of aggregation – the higher the aggregation level, the lower the diversification effect.
Alternative risk measurements to 99% tail VAR for Swiss Re Group
| Download |
in USD billions, as of 31 December |
2016 |
2017 |
Change in % |
99% VaR |
14.5 |
14.6 |
1 |
99.5% VaR |
17.4 |
17.4 |
0 |
Find more information about the internal risk model in Risk management – online only content.