IA of Hong Kong Publishes Stress Testing Scenarios in Relation to ORSA

The prescribed scenarios are designed so that a general business insurer considers the following in its ORSA report:

• Its capital adequacy in relation to risks that are not adequately reflected in its regulatory capital requirements; for example, Accident and Health accumulation risk, Hull accumulation risk, and Liability accumulation risk
• The risk, to its capital position, of two severe events or stresses happening at the same time
• The management actions it would need to take in such extreme events or stresses

Section 9 of GL21 sets out the minimum requirements for ORSA report that each authorized insurer subject to GL21 is required to prepare. Paragraph 9.5 (k)(ii) of GL21 stipulates that authorized insurers and reinsurers conducting the general insurance business, to which GL21 applies (general business insurers), should use the scenarios prescribed by the IA (Prescribed Scenarios) in their scenario and stress testing and include the results, with details of management actions and their impact and justification, in their ORSA reports. 

Related Links

• Circular (PDF)
• Prescribed Scenarios (PDF)

Keywords: Asia Pacific, Hong Kong, Insurance, Stress Testing, GL21, Enterprise Risk Management, ORSA, Capital Adequacy, Market Risk, Reporting, Scenarios, IA