Financial risk

Financial risk management involves identifying, assessing and controlling risks inherent in the financial markets as well as counterparty credit risks, while monitoring compliance with Swiss Re’s risk appetite and risk management standards.

Swiss Re’s central Financial Risk Management team oversees all activities that generate financial market or credit risk. Its mandate covers internally and externally managed assets, strategic participations, treasury activities, and credit and market risks that derive from Swiss Re’s underwriting and retrocession activities, including structured transactions, credit insurance and surety business. The Head of Financial Risk Management reports to the Group CRO, with a secondary reporting line to the Group Chief Investment Officer.

Financial Risk Management controls exposure accumulation for financial market and credit risks. In addition, the team is responsible for assurance activities related to asset valuation and financial risk models, as well as for reporting Swiss Re’s financial risks. These responsibilities are exercised through defined governance processes, including regular reviews by Swiss Re’s Senior Risk Council and other financial risk oversight bodies.

All activities with financial market and credit risk are subject to limits at various levels of the organisation (eg Group, lines of business and legal entities). At the highest level, the Group Board of Directors sets a financial risk concentration limit, which defines how much of the Group’s risk exposure can derive from financial risk. The Group Executive Committee establishes the principal risk limits for aggregate financial market and credit risk at Group level. Where required, additional risk limits are established by Risk Management for legal entities, key business lines, individual counterparties and countries. Furthermore, as part of the planning process, the risk-taking functions employ capacity limits to control the amount of risk mandated from the risk owner to the risk takers. Limits may be expressed in terms of losses in a stress scenario, value at risk based on historic market moves, linear sensitivities to a particular risk factor or different methodologies of exposure aggregation.

Financial Market SST ratio sensitivities


Impact on SST ratio

SST 2019

Interest rates +50bps


Interest rates –50bps


Spreads +50bps


Spreads –50bps


Equity values +25%


Equity values –25%


Real estate values +25%


Real estate values –25%


Among financial market sensitivities, the Group is most sensitive to a 50-basis point decrease in interest rates, leading to an estimated decrease in the SST ratio of 12 percentage points.

Credit risk stress test


Annualised, 99.5% VaR in USD millions

SST 2019

Credit default

2 331

Financial market riskChange since SST 2018: –8%

Risk developments

Financial market risk decreases mainly driven by significantly lower credit spread risk and to a lesser extent by lower equity risk. The decrease in credit spread and equity risk is driven by adverse market developments during 2018. The increased minority investment of MS&AD into ReAssure leads to a further reduction, in particular for credit spread risk.


Financial market risk is monitored and controlled by dedicated experts within the Group’s Financial Risk Management team. Financial Risk Management regularly reports on key financial market risks and risk aggregations, as well as on specific limits for internally and externally managed investment mandates. These reports track exposures, document limit usage and provide information on key risks that could affect the portfolio. The reports are presented and discussed with those responsible for the relevant business line at the weekly Financial Market Risk Council.

The reporting process is complemented by regular risk discussions between Financial Risk Management, Asset Management and the Group’s external investment managers, as well as by regular interactions with other key units that take financial market risk, such as Principal Investments and Acquisitions, Treasury and the respective business teams that write transactions.

Credit riskChange since SST 2018: +6%

Risk developments

Credit risk increases slightly since SST 2018 driven by business growth in credit and surety business.


Credit risk is monitored and controlled by experts within the Financial Risk Management team. Financial Risk Management regularly monitors and reports on credit exposures and limits. In addition, it is responsible for regularly monitoring corporate counterparty credit quality and exposures, and compiling watch lists of cases that merit close attention. These reports are presented and discussed with those responsible for the relevant business line at the weekly Credit Council.

The reporting process is supported by a Group-wide credit exposure information system that contains all relevant data, including counterparty details, ratings, credit risk exposures, credit limits and watch lists. Key credit practitioners across Swiss Re have access to this system, thus providing the necessary transparency to implement specific exposure management strategies for individual counterparties, industry sectors and geographic regions.

Credit risks are aggregated by country in order to monitor and control risk accumulation to specific risk drivers, such as economic, sovereign and political risks.