Front Matter Page
IMF Country Report No. 19/186
SWITZERLAND
FINANCIAL SECTOR ASSESSMENT PROGRAM TECHNICAL NOTE—INSURANCE STRESS TESTING
June 27, 2019
This Technical Note on Insurance Stress Testing for the Switzerland FSAP was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed in May 2019.
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Front Matter Page
SWITZERLAND
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE
INSURANCE STRESS TESTING
June 12, 2019
Prepared By
Monetary and Capital Markets Department
This Technical Note was prepared by IMF staff in the context of the Financial Sector Assessment Program in Switzerland. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP can be found at http://www.imf.org/external/np/fsap/fssa.aspx
Contents
Glossary
EXECUTIVE SUMMARY
INSURANCE STRESS TEST
A. Scope of the Stress Test and Risk Profile of the Insurance Sector
B. Scenario
C. Capital Standard and Modeling Assumptions
D. Results
E. Challenges in a Prolonged Low-Yield Environment
F. Summary of Findings and Recommendations
FIGURES
1. Asset Allocation of Insurance Stress Test Participants
2. Decomposition of Target Capital before Stress
3. SST Ratio after Stress
4. Changes in the Value of Assets and Liabilities
5. Cross-Check Against Top-Down Results
6. Contributions of Risk Factors in the Top-Down Model
7. Solvency Projections
8. Impact of Natural Disasters on Risk-Based Capital
9. Maturity and Average Coupon Rate of Insurers’ Fixed-Income Investments
TABLES
1. Main Recommendations on Insurance Stress Testing
2. Specification of the Adverse Scenario for Insurers
3. Financial Soundness Indicators of the Insurance Sector
APPENDICES
I. Insurance Sector Stress Test—Interest Rate Shocks
II. Insurance Sector Stress Testing Matrix (STeM)
Glossary
| BU |
Bottom-Up |
| CHF |
Swiss francs |
| EUR |
Euro |
| FINMA |
Swiss Financial Market Supervisory Authority |
| FSAP |
Financial Sector Assessment Program |
| FX |
Foreign Exchange |
| GAAP |
Generally Accepted Accounting Principles |
| IFRS |
International Financial Reporting Standards |
| LTV |
Loan-to-Value |
| ORSA |
Own Risk and Solvency Assessment |
| OTC |
Over-the-Counter |
| RBC |
Risk-Bearing Capital |
| SST |
Swiss Solvency Test |
| STEM |
Stress Testing Matrix |
| TD |
Top-Down |
| UL |
Unit- and Index-Linked Business |
| USD |
U.S. dollars |