Solvency test PKST ®

The Swiss Solvency Test for standardized solvency measurement

Due to the statutory nature of BVG insurance, pension funds must be linked to the employer, and profits and losses are therefore attributed in full to the risk community of the pension fund. In contrast, insurance companies have no obligation to contract, and surplus distribution among shareholders and policyholders is complicated and comparatively opaque. Through the solvency requirements in the Insurance Supervision Act and the Supervision Ordinance, the legislators make it clear that it must be possible to liquidate the company at all times. A standardized liquidation or solvency analysis is therefore of some benefit. This is why the Swiss Solvency Test (SST) was developed for all insurance companies. The test allows the regulator FINMA to standardize solvency measurement and make comparisons between insurance companies.

Solvency Test for Pension Funds

Subsequently, the question was raised on several occasions as to whether the Federal Social Insurance Office or the High Regulatory Commission for Swiss pension funds ("Oberaufsichtskommission") should also set a solvency test for pension funds in Switzerland. A similar discussion is also being held in the EU in relation to Solvency II.

The PKST ® Solvency Test

The Swiss Chamber of Pension Actuaries developed the PKST ® solvency test in two working groups. The PKST ® is intended to have a preventative and complementary control function for technical analysis; it offers an additional perspective with supplementary information.

The PKST ® solvency test answers the question of whether the pension fund can be liquidated with sufficient certainty in the next 12 months at "close-to-market" conditions. There is therefore a clear distinction between technical analysis (long-term) and solvency analysis.

The PKST ® solvency test developed by the Chamber is mathematically sound, scalable (level of certainty can be freely selected) and based on stochastic models; nevertheless, it can be modeled with a moderate amount of effort and is therefore "suitable for experts".

The Chamber and the Swiss Association of Pension Funds believe that the PKST ® solvency test should not replace the current technical analysis, but should be voluntary and have a preventative and complementary control function for technical analysis. Consequently, all measures are still to be derived from the technical analysis. The solvency analysis is to be standardized across all pension funds in terms of the concepts and, in the basic principles, also the method, and is to serve as a basis for comparison for the individually configured technical analysis. Major deviations from the technical analysis are to be considered by the management body and discussed with experts.

Experts have access to an Excel tool and guidance, which can be ordered on the SCPA home page. A license agreement must be completed for the Excel tool. The tool will be regularly updated and in general will only be available to members of the SCPA.

Members of work group risk monitoring

head of work group

  • Roger Baumann

members

  • Christoph Ryter
  • Cédric Regad
  • Martin Siegrist
  • Christophe Steiger
© 2019 Kammer der Schweizerischen Pensionskassen-Experten. Alle Rechte vorbehalten.