In a letter, the department said it expects every insurer to have a scenario stress testing process in place as part of prudent management.
“Insurers should systematically review their stress testing and scenario analyses, especially in light of recent market events,” the letter states. “Scenarios may include:
interest rate shocks, equity market shocks, yield curve shifts, changes in credit quality and liquidity, rating agency downgrades, collateral calls and large-scale catastrophes.
According to the letter, any models utilized by insurers are subject review and insurers may be required to furnish relevant reports and analyses demonstrating the use of stress testing in the management of their businesses.
The Department’s reviews will be conducted primarily on-site at the insurers’ offices, and initially the Department will focus its attention on
Source: New York State Insurance Department
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