A new approach to the Swiss Solvency Test (SST)

Effixis successfully develops and implements a simulation-based software tool for market risk, adopted by over 200 market participants.
10/01/2021
Mathematical Modeling
Public Sector

Context

Our collaboration with FINMA, the Swiss Financial Markets Supervisory Authority, is a prime example of our team’s ability to navigate multi-stakeholder projects and deliver results that transform industries.

FINMA regulates insurance companies and conducts an annual regulatory test known as the Swiss Solvency Test (SST). This test calculates risk-based solvency regulatory capital for insurance balance sheets, factoring in market, credit, and insurance risk models. Seeking to introduce new simulation-based market risk models using Monte-Carlo methods, FINMA required a viable open-source software solution that could be distributed to the entire market. Effixis was selected to develop and implement this groundbreaking tool.

Challenges

Multi-Stakeholder Complexity 

Our team quickly identified the need for effective communication and collaboration among the diverse stakeholders involved in the project. To ensure a smooth process, Effixis established a centralized project management system, enabling stakeholders to stay informed and participate in critical decision-making.

IT Constraints 

Understanding the diverse IT systems and infrastructure across the participating insurance companies, our team prioritized developing a flexible and adaptable software solution. We conducted thorough assessments of each company’s IT constraints and leveraged our technical expertise to create a tool that could seamlessly integrate with various systems.

Legal Constraints 

As a regulatory authority, FINMA had specific legal requirements that needed to be adhered to in the development and implementation of the software solution. Effixis worked closely with FINMA’s legal team to ensure full compliance with all regulatory guidelines, addressing any concerns in a timely manner and maintaining a strong focus on data privacy and security.

Outcome

Effixis successfully developed and implemented the open-source, simulation-based market risk software tool, which was adopted by all 200+ market participants, including insurance companies. This achievement not only streamlined the Swiss Solvency Test but also demonstrated the power of collaboration and innovation in addressing complex challenges.

Our work with FINMA exemplifies Effixis’ commitment to providing cutting-edge solutions that meet our client’s needs and exceed their expectations. By navigating the complexities of multi-stakeholder projects and addressing IT and legal constraints, we delivered a transformative solution that revolutionized the Swiss insurance industry’s approach to market risk management.

If you wish to have more information on the Effixis SST, feel free to visit: https://effixis.ch/risk-advisory/

Technologies

Python
R

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