STRESS TESTS IN THE INSURANCE FIELD – CONCEPTUAL OR IMPLEMENTING DIFFICULTIES
STRESS TESTS IN THE INSURANCE FIELD – CONCEPTUAL OR IMPLEMENTING DIFFICULTIES

Summary/Abstract: The insurance business is based on uncertainty. Therefore, the insurer must take a lot of possible results in consideration, results that could affect its current and forthcoming financial situation. Stress tests are a necessary tool for the insurer when it comes to managing risks. At the same time, an insurer must maintain the financial resources at an adequate level to handle the risks. The main objective of this presentation is: to debate the role that stress tests should play when managing the risks an insurer faces, but also the way these tests could help the insurer maintain a certain level of solvability and capital adequacy; to emphasize the importance stress tests have in assisting the supervising authorities in evaluating the risks insurers have to deal with and to give an overview of the different factors that need to be taken in consideration when projecting and implementing stress tests, including a discussion on the modeling techniques that could be used. The research methodology used for this paper is mixed, combining qualitative research – aiming to gather an in-depth understanding of insurance particularities - and quantitative research – to develop and employ mathematical models, theories and/or hypotheses pertaining to stress tests.

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