Swiss Solvency Test — the module guide
The SST module implements StandRe, the standard model FINMA prescribes for reinsurers under the Swiss Solvency Test, as four node types on the platform. It is written for the actuaries and risk managers who prepare a reinsurer's SST, and for the finance and underwriting teams who want to see where the capital number comes from. Instead of a workbook whose component distributions are "calculated outside of the template", the module computes the whole chain itself: parameter segments and scenarios go in, the standalone one-year risk capital for non-life insurance risk, the market value margin and the SST ratio come out.
The question the test answers
How much capital does a reinsurer need to carry its balance sheet through a bad year? The SST measures it with the expected shortfall at 99 % of the one-year loss: the average of the worst 1 % of outcomes. StandRe produces the non-life insurance part of that number. In the SST-Template it is aggregated with market risk and credit risk into the target capital, which is set against the risk-bearing capital to give the SST ratio.
The five components
StandRe cuts non-life insurance risk along two axes: attritional versus individual events, and prior years (reserve risk) versus the current year (premium risk).
| Attritional | Individual | Nat cat | |
|---|---|---|---|
| Prior years | AER | IE2 | — |
| Current year | AEP | IE1 | NE |
- AER and AEP are each one log-normal distribution. The reinsurer's parameter segments are converted to the SST currency, discounted with their payment pattern, and aggregated by StandRe's variance-covariance method: the aggregate mean is the sum of the means, the aggregate standard deviation is √(σᵀΓσ), where the correlation matrix Γ is the product of the line-of-business, region and type-of-contract effects.
- IE1 and IE2 are frequency-severity models: a Poisson count of events above a modelling threshold with a generalized Pareto severity. The parameters are calibrated so that the model's exceedance frequency curve, EF(x) = λ · S(x), fits the curve traced by the scenarios. The fit quality is reported as a root-mean-square residual in log space. A fit that ran into the edge of the shape search is flagged rather than passed off as a good one. The annual aggregate is then computed exactly by Panjer recursion.
- NE, the nat cat component, is taken from the reinsurer's internal cat model, entered as an expected loss and a coefficient of variation.
The aggregation component AG combines them in the prescribed grouping. Prior-year risk is AER + IE2, current-year risk is AEP + IE1 + NE, and the aggregate is their sum. Each sum is a discrete convolution on an equidistant grid. The decomposition shows each line's expectation, expected shortfall and centered shortfall, together with the diversification between them, in the order the template reports it.
From the distribution to the capital
standalone one-year risk capital
= ES99%(aggregate loss − E[aggregate loss])
− expected non-life insurance result
The expected insurance result (expected premiums less losses less expenses for the current underwriting year, net and discounted) reduces the requirement. A book expected to make money needs less capital to survive a bad year.
The market value margin is the cost of holding capital for the whole run-off of today's liabilities. Each risk class's centered expected shortfall is projected into future years by its run-off factor and charged at the prescribed 6 % cost-of-capital rate. Each charge is discounted on the risk-free curve of the SST currency, and the discounted charges are summed.
The SST filing and the ratio
A filing records which numbers a model run produced, for which company and SST year, and under which status: the official SST, a field test or an interim calculation. It carries the standalone market and credit risk capitals and the diversification effect, so it can show the full target capital:
target capital = non-life risk capital + market risk capital + credit risk capital + diversification
SST ratio = risk-bearing capital / target capital
The ratio places the company in one of the three supervisory bands: green above 100 %, yellow between 33 % and 100 %, red below 33 %. When the target capital is not positive, no ratio can be reported, and the filing says so rather than printing a number.
The four types
- Parameter Segment is one row of the AER or AEP parameterisation, at the granularity the reinsurer chooses. It keeps the raw estimation inputs and the estimated coefficient of variation alongside the selected one, so the expert judgement between them is on record.
- Scenario is one stated frequency and severity. The module ships the FINMA scenario catalogue, and you can add company scenarios of your own. Together the scenarios trace the exceedance frequency curve IE1 and IE2 are calibrated to.
- StandRe Model holds the model structure (SST currency, the IE1 and IE2 modelling thresholds, the referenced segments and scenarios, the nat cat inputs and the expected result) and shows the run: inputs, the decomposition and the capital.
- SST Filing is the reporting face: target capital, market value margin, SST ratio and band, and a reconciliation against the figures the model produces.
It reuses the data model
Line of business, region, currency, peril and the yield curves are the existing Reinsurance dimensions, referenced by node path. The SST adds no dimension of its own. The FINMA-prescribed SST 2026 risk-free curves (CHF, EUR, USD, GBP and JPY) and exchange rates ship both inside the model and as ordinary yield-curve nodes, so the rest of the suite can discount against them.
Deterministic, therefore testable
There is no Monte Carlo anywhere in the chain. The attritional components are closed-form
log-normals, the individual components are compound Poissons by Panjer recursion, and the aggregation
is a convolution. Every figure reproduces to the last digit, which is what lets each type's Tests
area assert on them.
A typical workflow
- Enter or import your AER and AEP parameter segments, mapped onto the StandRe segments, with their payment patterns.
- Review the scenario catalogue and add company-specific scenarios.
- Set up a StandRe model: choose the modelling thresholds, reference the segments and scenarios, enter the nat cat inputs and the expected result. Check the calibration and the decomposition.
- Create the filing for the SST year, add the market and credit risk capitals and the risk-bearing capital, and read off the ratio and its band.
What you get when you subscribe
A subscription opens the four types with their live views and test suites, the FINMA reference data for SST 2026, and the scenario catalogue. The worked example, a complete filing with its segments, scenarios and model, ships in the Reinsurance Demo. To learn the method step by step, take the course The Swiss Solvency Test, whose first lesson is free.