IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v36y2011i2p254-282.html
   My bibliography  Save this article

A Traffic Light Approach to Solvency Measurement of Swiss Occupational Pension Funds

Author

Listed:
  • Alexander Braun

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, CH-9010, St. Gallen, Switzerland. E-mails: alexander.braun@unisg.ch, przemyslaw.rymaszewski@unisg.ch, hato.schmeiser@unisg.ch)

  • Przemysław Rymaszewski

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, CH-9010, St. Gallen, Switzerland. E-mails: alexander.braun@unisg.ch, przemyslaw.rymaszewski@unisg.ch, hato.schmeiser@unisg.ch)

  • Hato Schmeiser

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, CH-9010, St. Gallen, Switzerland. E-mails: alexander.braun@unisg.ch, przemyslaw.rymaszewski@unisg.ch, hato.schmeiser@unisg.ch)

Abstract

In this paper, we combine a stochastic pension fund model with a traffic light approach to solvency measurement of occupational pension funds in Switzerland. Assuming normally distributed asset returns, a closed-form solution can be derived. Despite its simplicity, we believe the model comprises the essential risk sources needed in supervisory practice. Owing to its ease of calibration, it is well suited for a regulatory application in the fragmented Swiss market, keeping costs of solvency testing at a minimum. We calibrate and implement the model for a small sample of ten Swiss pension funds in order to illustrate its application and the derivation of traffic light signals. In addition, a sensitivity analysis is conducted to identify important drivers of the shortfall probabilities for the traffic light conditions. Although our analysis concentrates solely on Switzerland, the approach could also be applied to similar pension systems.

Suggested Citation

  • Alexander Braun & Przemysław Rymaszewski & Hato Schmeiser, 2011. "A Traffic Light Approach to Solvency Measurement of Swiss Occupational Pension Funds," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 36(2), pages 254-282, April.
  • Handle: RePEc:pal:gpprii:v:36:y:2011:i:2:p:254-282
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/gpp/journal/v36/n2/pdf/gpp20113a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/gpp/journal/v36/n2/full/gpp20113a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:36:y:2011:i:2:p:254-282. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.palgrave-journals.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.