《Stress_testing_by_insurers_guidance_paper》.pdf

Guidance Paper No. 8 INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS STRESS TESTING BY INSURERS GUIDANCE PAPER October 2003 [This document was prepared by the Solvency Subcommittee in consultation with members and observers.] Stress testing by insurers Contents 1. Introduction 3 2. Objectives of stress testing 5 3. Scope of coverage 6 4. Required expertise 7 5. Designing stress tests 7 6. Frequency and time horizon of stress testing 13 7. Modelling techniques used in stress testing 13 8. Model validation and documentation 14 9. Complexity of scenarios and interactions among risks 15 10. Modelling management actions 16 11. Limitations of stress tests 17 12. Reporting to board and management 17 13. Public disclosure issues 18 14. Use of the results by supervisors 19 1. Introduction 1. The IAIS adopted a paper in January 2002 entitled Principles on capital adequacy and solvency, which sets out principles that should underlie solvency regimes for the regulation and supervision of insurers, including principles regarding the level of solvency. This guidance paper on stress testing most directly addresses Principle 10: Principle 10: Capital adequacy and solvency regimes have to be supplemented by risk management systems. However, stress tests are also relevant to many other principles, such as: Principle 1: Technical provisions of an insurer have to be adequate, reliable, objective and allow comparison across insurers Principle 3: Assets have to be appropriate, sufficiently realisable and objectivel