As a reinsurance company registered in Switzerland, EUROPA Re is subject to Swiss Solvency Test (SST), which is duly certified by an appointed actuary approved by the Swiss Financial Market Supervisory Authority  (FINMA).

The risk-based SST regime is fully-equivalent with the EU Solvency II¹, which specifies reinsurers’ probability of default based on (i) ratings assigned by external credit assessment institutions (ECAI’s) in case of rated reinsurers or (ii) risk-based solvency ratios in case of unrated reinsurers domiciled in EU-equivalent supervisory regimes (Table 1).

Table 1: Reinsurers’ probability of default based on ECAI ratings or solvency ratios²



Since EUROPA Re does not hold a rating by a nominated ECAI (as it would need a few more years of experience to undergo the exercise), the probability of default can be assigned based on its risk-based SST ratio.

Europa Re applies prudent risk management policies that define its risk appetite and risk tolerance in such level to preserve a SST ratio above 200%. Based on EU Solvency II specifications, Europa Re’s 2019 risk-based solvency ratio of 241%  confirms a low probability of default (0.01%) at the level of reinsurers with investment grade, which is a good indicator of Europa Re’s credit worthiness.




References:
(1) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2015_248_R_0015
(2) https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015R0035&from=EN
The regulation lays down implementing technical standards about the allocation of credit assessments of external credit assessment institutions to an objective scale of credit quality steps in accordance with Directive 2009/138/EC of the European Parliament and of the Council