Swiss Federal Department of Finance FDF Swiss Federal Office of Private Insurance FOPI Swiss Solvency Test Field Test 2006 This version:

1 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Introduction Apart from the insurance undertakings for which the preparation of the SST report 2006 was mandatory (that is, those life companies whose premium volume ≥ CHF 1bn and those non life companies whose premium volume is ≥ CHF 500Mio) there was a considerable number of voluntary participants among small and middle sized insurers. Life Number of insurers with premium volume ≥ CHF 1bn8 Number of insurers with premium volume < CHF 1bn6 Non Life Number of insurers with premium volume ≥ CHF 500Mio9 Number of insurers with premium volume < CHF 500Mio 10 Health Number of insurers participating 13

2 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Introduction Companies with full or partial internal SST model Life5 Non Life9 Health2

3 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Comparison of Solvency I and SST

4 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Comparison of Solvency I and SST Comparison of Solvency 1 Ratio and SST Solvency Ratio on the basis of Balance Sheet : For non-life companies the statutory solvency ratio has a very weak relationship with SST solvency ratio. Therefore the statutory solvency ratio is no predictor of SST solvency ratio.

5 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Comparison of Solvency I and SST

6 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Assets: Market vs Statutory value

7 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Assets: Market vs Statutory value

8 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Assets: Market vs Statutory value

9 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Liabilities: Market vs Statutory value

10 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Liabilities: Market vs Statutory value

11 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Liabilities: Market vs Statutory value

12 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate, MVM and SCR

13 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate of Liabilities, MVM and SCR

14 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate, MVM and SCR

15 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate of Liabilities, MVM and SCR

16 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate, MVM and SCR

17 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Best Estimate of Liabilities, MVM and SCR

18 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital

19 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital

20 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital

21 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital - Weighted average

22 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital - Weighted average Insurance Risk Market Risk Diversification Exp. Tec. Result Exp. Fin. Result Scenarios Credit Risk SCR MVM Target Capital Components of Target Capital: Mean value (Non Life) (weighted average)

23 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Target Capital - Weighted average

24 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk

25 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk

26 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk

27 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk - Weighted average

28 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk - Weighted average

29 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Market Risk - Weighted average

30 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

31 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

32 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

33 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

34 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

35 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components Insurance Risk as fraction of RBC

36 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Insurance Risk: Non Life

37 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Components of Insurance Risk: Non Life

38 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Historical Financial Scenario as fraction of RBC

39 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Historical Financial Scenario as fraction of RBC

40 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Historical Financial Scenario as fraction of RBC

41 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Selected Scenarios as fraction of RBC

42 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Selected Scenarios as fraction of RBC

43 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Effect of Selected Scenarios as fraction of RBC

44 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of Historical Scenarios (Intervention Levels) Intervention Levels: 1. Green Level – SST ratio remains over 100 % 2. Yellow Level – SST ratio falls below 100 %, but remains over 60 % 3. Orange Level – SST ratio is reduced to less than 60 % The blue colour stands for the SST ratio prior to any scenario occurrence No Scenario Real estate crash (with increase in interest rates) Stock market crash (1987) Nikkei crash (1990) European currency crisis (1992) US interest rate crisis (1994) LTCM (1998) Stock market crash (2000/2001) (RBC - SCENARIO) / TC Impact of historical scenarios on Life Market

45 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of Historical Scenarios (Intervention Levels)

46 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of Historical Scenarios (Intervention Levels)

47 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of "Specific Scenarios" (Intervention Levels)

48 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of "Specific Scenarios" (Intervention Levels)

49 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Change in SST Ratio due to Impact of "Specific Scenarios" (Intervention Levels)

50 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Macaulay Duration for Life Companies

51 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: Run-Off Pattern ( Non Life )

52 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: Runoff Risk Relative standard deviation of Reserves per line of business.

53 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: New Claim Risk Relative standard deviation of attritional (i.e. normal or small) claims per line of business.

54 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: Boxplot (from Wikipedia) In descriptive statistics, a boxplot is a convenient way of graphically depicting the five- number summary, which consists of the smallest observation, lower quartile (x.25), median, upper quartile (x.75) and largest observation; in addition, the boxplot indicates which observations, if any, are considered unusual, or outliers. The boxplot was invented in 1977 by American statistician John Tukey. For a data set, one constructs a horizontal box plot in the following manner: Calculate the first quartile (x.25), the median (x.50) and third quartile (x.75) Calculate the interquartile range (IQR) by subtracting the third quartile from the first quartile. (x.75-x.25) Construct a box above the number line bounded on the left by the first quartile (x.25) and on the right by the third quartile (x.75). Indicate where the median lies inside of the box with the presence of a line dividing the box at the median value. Any data observation which lies more than 1.5*IQR lower than the first quartile or 1.5*IQR higher than the third quartile is considered an outlier. Indicate where the smallest value that is not an outlier is by a vertical tic mark or "whisker", and connect the whisker to the box via a horizontal line. Likewise, indicate where the largest value that is not an outlier is by a "whisker", and connect that whisker to the box via another horizontal line.

55 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: How to read the box plots? + Minimal ValueMaximal Value 25%-quantile Median 75%-quantile Outlier (excluded from evaluation)

56 Federal Department of Finance FDF Swiss Federal Office of Private Insurance Appendix: waterfall chart (from Wikipedia) A waterfall chart is a special type of floating-column chart. A typical waterfall chart shows how an initial value is increased and decreased by a series of intermediate values, leading to a final value. An invisible column keeps the increases and decreases linked to the heights of the previous columns.