IA of Hong Kong Publishes Stress Testing Scenarios in Relation to ORSA
IA of Hong Kong published the prescribed scenarios for stress and scenario testing to be used by the authorized insurers conducting general insurance business. The prescribed scenarios are in line with GL21, which is the guideline on enterprise risk management. The guideline was published on July 05, 2019 and takes effect from January 01, 2020. The prescribed scenarios shall be adopted for the first Own Risk and Solvency Assessment (ORSA) report, which is required for the financial year ending on or after December 31, 2020 and for future ORSA reports until IA prescribes new scenarios. The three prescribed scenarios are the market risk scenario, the self-defined insurance loss scenario, and the largest loss scenario with largest market risk scenario.
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
Keywords: Asia Pacific, Hong Kong, Insurance, Stress Testing, GL21, Enterprise Risk Management, ORSA, Capital Adequacy, Market Risk, Reporting, Scenarios, IA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Previous Article
FED Publishes FAQs on Tailoring Rules for BanksRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances