Zurich’s reinsurance unit is applying to the Swiss regulator for internal model approval, after the watchdog ruled ZRe could not use the standard model.
The Eidgenössische Finanzmarktaufsicht (Finma) is due to receive ZRe’s application by 31 October, ZRe said in its annual financial condition report (FCR), Switzerland’s version of the EU’s solvency and financial condition report.
Zurich published a group FCR, and separate documents for four subsidiaries, on 30 April.
“The expectation within the Zurich Group is to have ZRe’s approved internal model integrated within the Zurich Group’s internal model framework,” Zurich said in ZRe’s FCR. ZRe focuses mainly on reinsurance for other group entities.
George Quinn, the group’s chief financial officer, said of the Swiss reporting requirements: “We are very supportive of any disclosure that improves transparency, helping customers to choose a reputable and financially sound company.”
For the closing quarter of 2017 ZRe, which was called Zurich International (Bermuda) Ltd until late in 2016, used a ‘transitional internal model’ approved by Finma, producing a Swiss Solvency Test (SST) coverage ratio of 430%.
Zurich said ZRe’s model was broadly consistent with the group’s internal model, before recent updates approved by Finma.
Updates Finma required to Zurich’s group model irritated the underwriter, and it warned investors at its full-year results that its SST ratio from the start of 2017 would be set back as a result. The eventual 23 percentage point reduction, from 227% to 204%, was at the higher end of its initial guidance of a 10 to 25 percentage point drop.
But 12 months on, the coverage rebounded somewhat, to 216%, as “favourable economic and business changes” were only partially degraded by a higher dividend.
This places Zurich’s solvency coverage between peers Helvetia Holding (212%) and Swiss Re (269%).
Zurich’s local subsidiaries’ coverage ratios at the end of last year varied from 196% (Orion Rechtschutz-Versicherung AG), to 212% (Zurich Insurance Company), 216% (Zurich Insurance Group), 251% (Zurich Life Insurance Company) to the 430% at ZRe.
Zurich’s FCRs are published here
- All SFCR reports, including of Zurich’s subsidiaries subject to Solvency II, and associated quantitative reporting templates (QRTs) are available from InsuranceERM as part of a new insurance risk data service. This service combines European insurers' financial and regulatory filings, including the new Solvency II disclosures, into a single, comprehensive and user-friendly database ideal for market/peer analysis, research and benchmarking. To find out more please email [email protected]
