Stress testing in a SII environment
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Identification of stresses (I)<br />
• Is the stress test for all <strong>in</strong>surers, for life or non-life, specific products?<br />
• Is the stress test run at the same time as the bank<strong>in</strong>g stress test?<br />
► If so:<br />
◆Ensure that there is some coord<strong>in</strong>ation with the bank<strong>in</strong>g supervisor<br />
◆The market risk assumptions should be aligned<br />
• The pre-screen<strong>in</strong>g and market diagnostic/monitor<strong>in</strong>g work (described above) may<br />
have already identified particular risks that require further assessment.<br />
► High lapses and surrenders → test potential liquidity stra<strong>in</strong> and implications of<br />
further <strong>in</strong>crease of surrenders on <strong>in</strong>surers’ solvency.<br />
► Massive fall <strong>in</strong> real estate values → Impact on <strong>in</strong>surers’ balance sheet and<br />
regulatory position<br />
► High concentration <strong>in</strong> the market → assume <strong>in</strong>creased default<br />
INTERNATIONAL MONETARY FUND 21
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