Empire State To Schedule Stress Tests

“The department expects every insurer to have a scenario stress testing process in place as part of prudent management,” officials write. “The department intends to review those processes, including investment functions, to discern how different economic scenarios are analyzed by senior management to determine what actions are warranted. Insurers should systematically review their stress testing and scenario analyses, especially in light of recent market events.”

Scenarios tested could include interest rate shocks, stock market shocks, yield curve shifts, changes in credit quality and liquidity, rating agency downgrades, collateral calls, and large-scale catastrophes, officials write.

In addition to reviewing companies’ models, “the department will evaluate how such models are independently reviewed within the company by risk management professionals, internal auditors, external auditors and/or consulting firms,” officials write.