BACKGROUND

Stress testing is a forward-looking exercise whose objective is to assess the impact of severe but plausible adverse scenarios on the resilience of individual financial institutions (mostly banks and insurance firms) or the financial system. While stress tests are used by financial institutions for risk management purposes, supervisory authorities use stress tests to evaluate the prospective resilience of supervised entities to specified risks. The results of stress testing exercises help supervisors in identifying the vulnerabilities of the financial sector and find ways to improve its resilience. In the MEFMI region, the use of stress testing exercises by banks and bank supervisors is widespread and has become an important part of the supervisory frameworks in place. However, the use of stress testing in the supervision of insurance companies is relatively new. Through its Insurance Core Principles (ICPs), the International Association of Insurance Supervisors (IAIS) has formalised the use of stress testing by insurance companies. For instance, IAIS ICP 24 states that insurance supervisors must put in place an appropriate form of stress testing applied to the insurance sector as a whole or a significant sample of insurers. The Insurance Stress Testing Retreat will provide the participants with an opportunity to familiarise themselves with global approaches and tools used in insurance stress testing. Afterwards, the participants will be expected to play a leading role in promoting the use of insurance stress testing in their respective jurisdictions and the rest of the region.

OBJECTIVES
The objective of the retreat is to enhance the participants’ knowledge of the approaches and tools used in insurance stress testing including their customisation to suit the peculiarities of the individual MEFMI countries. At the end of the retreat, the participants should be able to:

1. Explain the approaches to insurance stress testing and the importance of conducting microprudential and macroprudential stress tests for the insurance sector; 2. Understand the IMF stress testing tools for the insurance sector;
3. Customise the stress testing tools and use them to conduct stress tests in their respective jurisdictions; and 4. Conduct insurance stress testing exercises using available stress testing tools.

TARGET GROUP
This retreat targets MEFMI fellows and other officials responsible for microprudential and macroprudential supervision, as well as stress testing in insurance supervisory authorities and central banks in MEFMI member countries.

Participation in the retreat is strictly by invitation.