SST target capital (SST TC)

Swiss Re uses an internal risk model to determine the economic capital required to support the risks on the Group’s book, as well as to allocate risk-taking capacity to the different lines of business. The model also provides the basis for capital cost allocation in Swiss Re’s EVM framework, which is used for pricing, profitability evaluation and compensation decisions. In addition to these internal purposes, the model is used to determine regulatory capital requirements under economic solvency frameworks such as SST and Solvency II.

In 2017, FINMA approved Swiss Re’s internal model and its components for use of SST reporting purposes under their revised model review process. In 2018, FINMA conducted a material review of Swiss Re’s credit risk model, which was approved for use of SST 2019 though it will require minor adjustments for later reporting periods.

Since SST 2018, two major model changes have been implemented and were approved by FINMA in October 2018:

  • Financial market risks – The change in calibration approach had no impact on required capital when it was introduced. The prospective impact is contingent on financial markets developments.
  • Critical illness, income protection and hospital cash risk – The introduction of the new health model resulted in an increase in required capital.

The risk exposure basis for SST is a projection for the period from 1 January 2019 to 31 December 2019 and is based on the economic balance sheet as of 31 December 2018 and adjustments to reflect 1 January 2019 business shifts.

In order to derive SST TC, total risk is adjusted for the line item Other impacts as shown in the table below.

SST TC remains broadly stable at USD 23.2 billion as minor changes in total risk and other impacts offset each other (see Risk assessment p. 87 for details).

Other impacts mainly reflect run-off capital costs (MVM) – which are deducted again from target capital to calculate the ratio – as well as the impact from business development over the forecasting period and requirements from FINMA that are not included in total risk as they are not consistent with Swiss Re’s own risk view.

The increase in MVM is mainly driven by actual and projected growth in Asian critical illness business and model improvements. These effects are partly offset by the depreciation of major currencies against the US dollar and slightly higher interest rates, mainly in US and Canadian dollar.

SST Target Capital


USD millions

SST 2018

SST 2019


Total risk

19 859

19 713


Other impacts

3 301

3 498


SST target capital

23 160

23 211


Market value margin

5 943

7 023

1 080

SST target capital – market value margin

17 217

16 188

–1 029