Release Notes

21st March 2024

Swiss Solvency Test:

• Asset class volatilities and correlations are updated.

Insurance Capital Standards updates for the 2023 Consultation:

• Non-Default Spread risk was adjusted to a relative bi-directional stress to reflect the dynamics of the term-structure approach introduced for Market Adjusted Valuation. The new relative stress has been set as the maximum of an upward and downward 75% relative stress, subject to a floor of zero.
• NAD (Neutral Adjusted Dampener) is added to ICS and K-ICS (previously only J-ICS). Currently using the same value as the monthly updated Symmetric Adjustment values from SII.
• Infrastructure equity is implemented as a special equity sub class, with reduced charges for DM and EM equities at 27% and 37% respectively; and there is 0.75 correlation between EM infra and EM non-infra equity.
• Infrastructure debt now receives 25% discount on Credit risk charge.

Australian LAGIC:

• Real interest rates stress updated: The stress adjustments to real interest rates are determined by multiplying the greater of three per cent or the nominal risk-free interest rates (before addition of any illiquidity premium), by 0.25 (upward stress) or by -0.20 (downward stress). The maximum stress adjustment is 200 basis points in either direction. The minimum upward stress is 75 basis points and the minimum downward stress is 60 basis points.
• Expected inflation rates are defined as an increase of 125 basis points and a decrease of between 50 and 100 basis points.
  • A downward stress of 50 basis points applies when the nominal risk-free interest rate (before addition of any illiquidity premium) is negative.
  • A downward stress of 100 basis points applies when the nominal risk-free interest rate (before addition of any illiquidity premium) exceeds one per cent per annum.
  • If the nominal risk-free interest rate (before addition of any illiquidity premium) is between zero and one per cent per annum, the downward stress is determined as the sum of 50 basis points and half of the nominal risk-free interest rate (before addition of any illiquidity premium).
• Probability of default for credit spread risk capital is updated to a higher set of [Rating: Values]: 1:2%,2: 2%,3:4%,4:6%,5:8%,6:12%,7:20%.

The other regulatory regimes have been checked and no material changes identified, apart from The new S&P Insurance Capital Standard that was introduced mid-2023 and will be implemented in the next release of the software.