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Stress Testing for Reinsurers

Stress Testing for Reinsurers. SST for Reinsurers April 4, 2006. Stress Testing for Reinsurers. Reinsurance companies are asked to provide their loss estimates for approx. 25 catastrophic events The events are standard events defined by FOPI

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Stress Testing for Reinsurers

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  1. Stress Testingfor Reinsurers SST for Reinsurers April 4, 2006

  2. Stress Testing for Reinsurers • Reinsurance companies are asked to provide their loss estimates for approx. 25 catastrophic events • The events are standard events defined by FOPI • The evaluation of the events is a complement to the internal model • Each event is subject to a materiality test • Purpose: • Check list for model completeness • Comparison between companies • The 25 catastrophic events are grouped into six broad categories

  3. Financial Events • Stock market crash 1987 • Nikkei crash 1989 • European currency crisis 1992 • Interest rate scenario 1994 • Russia/LTCM 1998 • Stock market crash 2001

  4. Life Insurance Scenarios • Pandemic scenario • Longevity

  5. Property Catastrophes • European windstorm • UK flood • US hurricane • California earthquake • New Madrid earthquake • Japanese earthquake • Japanese windstorm • Other territories

  6. Special Lines Catastrophes • Aviation catastrophe • Energy catastrophe • Credit event

  7. Other Man Made Catastrophes • Terrorism event • Industry event • Nuclear event

  8. Other Events • Adverse loss developments • Downgrading • Company specific scenarios

  9. Required Information • Gross loss • Net loss • Breakdown of recoveries by major retrocessionaires • Breakdown of gross loss by line of business • Narrative describing the company’s assumptions

  10. Stress Test for Reinsurers • Is a complement to a company’s internal model • Based on comprehensive set of events • Based on standard set of events • Each event is subject to a materiality test

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