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The Swiss Solvency Test and its Market Implications

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Author Info

  • Martin Eling

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland)

  • Nadine Gatzert

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland)

  • Hato Schmeiser

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland)

Abstract

In this paper, we first discuss the characteristics and major benefits of the Swiss risk-based capital standards for insurance companies (Swiss Solvency Test), introduced in 2006. As the insurance industry is one of the largest institutional investors in Switzerland, changes to its asset and liability management as a result of the new regulatory framework could have striking economic effects. Thus, we further examine significant market implications for the Swiss economy due to possible changes in the asset and liability management of Swiss insurance companies. We investigate resulting effects on the Swiss capital market, focusing on bond, real estate, stock, foreign exchange markets, and the situation in case of a capital market crisis. Furthermore, we analyze potential consequences to corporate financing and product design. Most of the considered consequences result from the transition of past (in principle, not risk-based) supervision to risk-based supervision and can thus be generalized to other supervision systems, in particular Solvency II. The Geneva Papers (2008) 33, 418–439. doi:10.1057/gpp.2008.20

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

Volume (Year): 33 (2008)
Issue (Month): 3 (July)
Pages: 418-439

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Handle: RePEc:pal:gpprii:v:33:y:2008:i:3:p:418-439

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Cited by:
  1. Höring, Dirk, 2012. "Will Solvency II market risk requirements bite? The impact of Solvency II on insurers' asset allocation," ICIR Working Paper Series 11/12, International Center for Insurance Regulation (ICIR), Goethe University Frankfurt.
  2. Eling, Martin & Pankoke, David, 2012. "Systemic Risk in the Insurance Sector – What Do We Know?," Working Papers on Finance 1222, University of St. Gallen, School of Finance.

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