Best stress scenarios software: Moody's Analytics Economic Scenario Generation Solutions
Stress testing is a crucial part of any enterprise risk programme because insurers need to understand the sensitivity of their liabilities and assets to different risk factors.
Moody's Analytics helps insurers with this process, using a combination of economic content, stochastic modelling and software.
The provider's ESG automation capability allows insurers to implement transparent, repeatable and auditable stress testing processes to fast time scales for risk neutral stochastic scenarios.
Moody's Analytics works closely with many clients to help them understand the subtleties of modelling and calibration choices and the impact on their liability projections.
For example, Solvency II presents challenges in terms of adjustments to the risk-free rate curve through the matching or volatility adjustments, meaning clients might not want to use standard calibrations for certain liability types.
Validating all the scenario outputs from a production cycle can be one of the most time-consuming tasks for clients.
To assist with this task the ESG Automation Module creates Excel-based validation reports that can include market consistency tests, such as instrument pricing tests, martingale tests and volatility tests.
Moody's Analytics has recently added a macro-economic variable modelling framework to project variables such as GDP, unemployment and house price inflation.