Capital and solvency are managed through an integrated and comprehensive framework of principles and governance structures as well as methodology, monitoring, and reporting processes. The capital management process is illustrated in Exhibit 14.8. At the group executive level, the Group Balance Sheet Committee defines the capital management strategy and sets the principles, standards, and policies for the execution of the strategy. Group Treasury and Capital Management are responsible for the execution of the capital management strategy within the mandate set by the Group Balance Sheet Committee.


Exhibit 14.8 Zurich's Capital Management Strategy

Within these defined principles, the group manages its capital using a number of different capital models, taking into account regulatory, economic, and rating agency constraints. The capital and solvency position is monitored and reported on a regular basis. Based on the results of the capital models and the defined standards and principles, Group Treasury and Capital Management has a set of measures and tools available to manage capital within the defined constraints. This tool set is referred to as the Capital Management Program.

The Capital Management Program comprises various measures to optimize shareholders' return and to meet capital needs, while enabling Zurich to take advantage of growth opportunities as they arise. Such measures are used as and when required and could include efficient balance sheet structuring as well as cash dividends, share buy-backs, special dividends, issuances of shares or senior and subordinated debt, and purchase of reinsurance.

The group seeks to maintain the balance between higher returns for shareholders on equity raised, which may be possible with higher levels of borrowing, and the security provided by a sound capital position. The payment of dividends, share buy-backs, and issuances and redemption of debt can have an important influence on Zurich's capital levels.

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