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OSFI releases draft guideline for stress testing


August 27, 2009   by Canadian Underwriter


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In its draft guideline for stress testing, the Office of the Superintendent of Financial Institutions suggests that insurers need to identify situations when the interrelationship of risk factors breaks down.
For a property and casualty insurer, changing economic conditions will not only influence investment income and company expenses, but can also, particularly in times of inflation, lead to higher claims and loss reserves, OSFI said in the guideline.
“The interrelations of various factors will depend upon the insurer’s products, its investment policy and its approach to managing its business,” OSFI said.
“A critical goal for insurers is to identify situations in which the assumed normal pattern of interrelationships breaks down due to a change in the business environment.”
The draft guideline is available at www.osfi-bsif.gc.ca.
Comments concerning the guideline should be addressed to Aina Liepins at aina.liepins@osfi-bsif.gc.ca by Sept. 28, 2009.


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