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2 results

  • 7 - Stress Testing

  • Mary R. Hardy, University of Waterloo, Ontario, David Saunders, University of Waterloo, Ontario
  • Book:
    Quantitative Enterprise Risk Management
    Published online:
    28 July 2022
    Print publication:
    05 May 2022, pp 202-226

  • Summary

    In this chapter, we discuss stress and scenario tests and testing frameworks. We begin with an introduction to stress testing and a discussion of where stress and scenario testing is most useful, as well as noting some limitations. This is followed by a study of methods for designing and generating stress scenarios. We then discuss regulator stress tests, and illustrate using examples of past failures and successes of real-world stress tests.

  • Empirical Evidence on the Use of Dynamic Solvency Testing and Financial Condition Reporting in the United Kingdom Life Insurance Industry

  • Y.-M. Shiu, P. Moles, A. T. Adams, C.-C. Chan
  • Journal:
    Annals of Actuarial Science / Volume 1 / Issue 2 / September 2006
    Published online by Cambridge University Press:
    10 May 2011, pp. 359-392

  • To gain insight into the use of Dynamic Solvency Testing (DST) and Financial Condition Reporting (FCR), a questionnaire was distributed to Appointed Actuaries in United Kingdom life offices. The response rate of the main survey was 76%. An independent-samples t-test for non-respondent bias was conducted and the results suggest that the respondent sample is representative of the survey population. Results from the 62 firms responding revealed: (1) Scenario testing was the most commonly used DST techniques. (2) Most life offices regularly run less than ten scenarios in scenario testing. (3) Most life offices reported using a five-year forecast period in DST. (4) The two most commonly seen difficulties are: difficulties in communicating complex issues to non-specialists, and how to present extremely adverse scenarios without causing undue concern. (5) Nearly all life offices use FCR. (6) Guidance Note 2 is generally considered acceptable. (7) Compared with the results reported by previous studies, the use of DST techniques is now more common in life offices. (8) There is a significant difference in DST/FCR practices between with-profits and non-profit offices.