The Swiss Solvency Test and its Market Implications

Geneva Papers on Risk and Insurance, Vol. 33, No. 3, pp. 418-439, 2008

Posted: 21 Aug 2012

See all articles by Martin Eling

Martin Eling

Ulm University

Nadine Gatzert

Friedrich-Alexander University Erlangen-Nürnberg

Hato Schmeiser

University of Münster - Faculty of Economics; University of St. Gallen - I.VW-HSG

Date Written: July 1, 2008

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.

Suggested Citation

Eling, Martin and Gatzert, Nadine and Schmeiser, Hato, The Swiss Solvency Test and its Market Implications (July 1, 2008). Geneva Papers on Risk and Insurance, Vol. 33, No. 3, pp. 418-439, 2008, Available at SSRN: https://ssrn.com/abstract=2132467

Martin Eling

Ulm University ( email )

Albert-Einstein-Alee 11
Ulm, D-89081
Germany

Nadine Gatzert (Contact Author)

Friedrich-Alexander University Erlangen-Nürnberg ( email )

Lange Gasse 20
Nuremberg, 90403
Germany
+499115302884 (Phone)
+499115302888 (Fax)

HOME PAGE: http://www.vwrm.rw.fau.de

Hato Schmeiser

University of Münster - Faculty of Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

University of St. Gallen - I.VW-HSG ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

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