Members of the International Underwriting Association (IUA) taking part in the general insurance stress run by the UK’s Prudential Regulatory Authority (PRA) have found it “valuable”.
The UK regulator’s Dynamic General Insurance Stress Test (DyGIST) is run over the course of May. It looks at several scenarios such a systemic cyber-attack, global financial downturn, major earthquake and hurricane events in the US and a large UK windstorm. There are also scenarios to test reinsurance resilience.
It examines insurers’ response to a “fast-moving, complex and evolving event”. This includes crisis management arrangements, with both balance sheet impacts and decision-making protocols under the microscope.
Nafisah Hussain, director of public policy at the IUA, said that the exercise is a “genuinely live test” with the PRA team and the London Market firms taking part unaware of test scenarios in advance and are responding in real time.
She said that it is a “rare and valuable way to test the whole insurance system” and the scenarios themselves are “deliberately stretching”.
Hussain added: “Stress tests are designed to examine the extreme boundaries of probability, and this one does exactly that. As well as putting IUA members on the spot, an important benefit of the exercise is to see the regulatory authority’s own operational processes tested under pressure. The PRA’s responsiveness so far has been helpful to companies working through a demanding operation.”
People:Nafisah Hussain
