Solvency

For information on the Group’s solvency information, risk-bearing capital, target capital and SST ratio, please see the Financial strength and capital management section on pages 74–76 of the 2018 Financial Report

Swiss Re uses an internal risk model to determine the economic capital required to support the risks on the Group’s books, 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 the 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.