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Identify key elements of transactions to enhance the SST ratio

The program “Introduction to the Swiss Solvency Test” will get you there

Moving from 'Learning' to solving a 'Real Business Issue'

Focus on solving a business issue

Learning returns the highest benefit when it is properly applied to solving real business problems. We recommend the line manager and the employee agree on measurable goals that will address known business issues.

The employee might then need to attend a development program such as this workshop. The objective is not just to attend a workshop, but rather to increase the employee’s business and financial acumen, and as a direct result of this development program, identify and help achieve specific, measurable, value-creating performance goals. To illustrate moving from learning-related goals to performance-related goals, we have prepared the following suggestions, which of course should be modified to meet the specific needs of the line manager and employee.

A business issue is on the table
Manager asks employee to solve the business issue
Training takes place with the issue in mind
Employee focuses on solving the issue
Employee reports outcome

  • Issue needs to be solved asap
  • Employee is unclear how to do that
  • Definition of KPIs to solve the issue
  • Training will be recommended to help solve the issue
  • Maybe a workshop
  • Maybe on-line
  • Employee addresses the issue with the newly acquainted knowledge
  • Employee shares how it was possible to meet the KPIs
  • Issue is solved

Value creating performance

Value-Creating Goal

Once you have gained the knowledge and understanding of the Swiss Solvency Test (SST) and the appreciation that solvency capital generation is directly linked to Swiss Re’s economic reporting (EVM), identify key elements of transactions which will enhance SST. Present your findings to your line manager, XFT leader or BD.

Suggested application tasks in order to meet the above-mentioned goal

After reviewing the SST reports, demonstrate your understanding of SST concepts within the Swiss Re environment by presenting three key ideas to your line manager.

  • Identify the impact of several current transactions on the SST ratio of Swiss Re and compare the ratio with competitors.
  • Make recommendations as to appropriate ways to meet SST requirements and to improve SST.
  • Identify and prioritize transactions which do not erode SST.

Summary

Addressing business issues - in a context of learning - promises to produce impressive ROIs.

When we consider all the benefits and costs, this type of training/development investment creates significant value and provides impressive quantifiable returns, both for the employee and for Swiss Re. Therefore, this approach moves us far beyond "just learning something"; it focuses us on the positive business outcomes by quantifying the expected costs and resulting value creation.

Our Thoughts – the Return on Investment (ROI) Calculation

This activity promises a strong ROI of 118%

The sections below reveal our calculation.

Select each thought (+) to learn more about it.

Quantifiable value: Any increase in SST will be reflected in the enhanced capital structure of Swiss Re, which should improve the competitiveness of the business and should flow through to potential new business.

Assume that a unit of total sales goal in the market equates to US$100,000,000 which comprises 1,000 new individual business opportunities, the value of a single new business opportunity is imputed at US$100,000 (US$100,000,000/1,000).

We assume that the contribution from each new opportunity could be 2%. The value therefore can be calculated this way: US$100,000 x 2%, which equates to US$2,000 in benefit.

However, this is really a small amount of the benefit which has been computed, the huge benefit is detailed in the next paragraph.

The above are the measurable values, however, there are also quantitative benefits to Swiss Re, which are complex to calculate, including: SST measures Swiss Re’s risks (the higher the risks, the larger capital is required), SST allows for an early warning system in recognising insurance companies which are experiencing financial distress (this could save Swiss Re huge amounts of value) and SST heightens risk awareness, thereby allowing Swiss Re to manage their relative risks.

Non-quantifiable value: Besides these measurable values, there are also non-quantitative benefits of this workshop. For example, the value of enhancing finance and business acumen/competencies of the employee, plus the enhancement of work quality, all of which often materialize over time.

Assume the cost of participating in the half-day workshop is US$300 which is the Swiss Re average cost.

Also assume the opportunity cost for being away from the desk for half a day is US$700. Further assume half a day of work is required to apply the findings and to achieve the above-mentioned performance goal, which adds an additional US$700 opportunity cost for not being productive.

Therefore, the total related cost of this learning investment is assumed to be US$1,700 (US$300 + US$700 + US$700).

The ROI in this case equates to a high 118% (US$2,000/US$1,700).

Don’t forget this ROI calculation is not considering the above-mentioned non-quantifiable value.

Additional savings could result since the savings could reoccur in subsequent years and the learnings from the workshop could be applied to other situations. In your own individual case, the numbers may differ, our intention here is to offer an example for creating your own ROI calculations.
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