Any methodology to set credit and illiquidity premia for the purpose of defining liability discount curves must be able to produce coherent and stable results over time to be of practical use for insurers. This paper analyzes the sensitivity to changes in underlying assumptions for Moody’s Analytics International Financial Reporting Standard (IFRS) 17 discount curve methodology and performs backtesting of the method to understand how corporate credit spreads would have been decomposed into credit and illiquidity risk at key points in time.
Read “IFRS 17 Credit and Illiquidity Premia Sensitivity and Backtesting” to learn more.