A Company must have a forward looking Stress Testing programme that addresses inter alia, underwriting, reserving, asset-liability management, investments, liquidity, reinsurance, concentration of risk, operational risk, risk-mitigation techniques and conduct of business , taking into account, that based on the Risk Profile of the Company, capital may be required in excess of the minimum capital requirements. The Stress Testing programme must also include any risks that are material for the Company given the nature of the business. These may include, but are not limited to, Credit risk, balance sheet and market risks, reserving; pricing, claims, reinsurance, operational, concentration and Group risks.
2.
A Company's Stress-Testing programme must be undertaken on a regular basis to facilitate the tracking of trends over time and developments in key risk factors and exposure amounts, in addition to ad hoc Stress Tests, when needed. The programme must cover at a minimum a range of scenarios based on reasonable and plausible assumptions regarding dependencies and correlations. Senior Management and, as applicable, the Board or Board risk committee must review and approve the scenarios.
3.
Stress Test programme results must be periodically reviewed by the Board or the Board risk committee. Results must be incorporated into reviews of the Risk Appetite, capital and liquidity planning processes. The Risk management function is responsible for recommending any action required, for example adjustments of Risk Limits or contingency arrangements, based on Stress Test results. The results of Stress Tests and scenario analysis must be communicated to the relevant business line management and functional heads within the Company to assist them in understanding and mitigating the risks inherent in their activities. Stress test programme results must factor into the Company's contingency planning, particularly liquidity Risk Management and contingency funding.