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 SST reporting purposes under their revised model review process. As a result of the material review on credit risk conducted by FINMA in 2018, Swiss Re implemented a minor update to the credit risk module, which has negligible impact on the credit risk figures. In 2019, FINMA conducted a material review of the Tropical Cyclone North Atlantic model, which was approved for use without conditions.

Since SST 2019, three major model changes have been implemented and were approved by FINMA in September 2019:

  • Costing and reserving risk – The improved correlation within portfolios and adjusted calibration of costing risk increase the costing & reserving risk but have no material impact on total risk.
  • Non-life claims inflation risk – The update of the inflation model resulted in a decrease in total risk.
  • Foreign exchange risk – The removal of contingent foreign exchange risk has no material impact on risk figures. In addition further model currencies were introduced commensurate with business growth in the respective areas.

The risk exposure basis for SST is a projection for the period from 1 January 2020 to 31 December 2020 and is based on the economic balance sheet as of 31 December 2019 and adjustments to reflect 1 January 2020 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 increases to USD 27.4 billion due to an increase in the market value margin (reflected under “Other impacts”) and higher total risk driven by increased insurance risk (see Risk assessment 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 the impact of lower interest rates and growth of mortality and health business in Asia and the US.

SST Target Capital

USD millions

SST 2019

SST 2020


Total risk

19 713

21 332

1 620

Other impacts

3 498

6 110

2 613

SST target capital

23 211

27 443

4 232

Market value margin

7 023

9 422

2 399

SST target capital – market value margin

16 188

18 021

1 833