Stress Testing for Reinsurers SST for Reinsurers April 4, 2006

Stress Testing for Reinsurers Reinsurance companies are asked to provide their loss estimates for approx. 25 catastrophic events The events are standard events defined by FOPI The evaluation of the events is a complement to the internal model Each event is subject to a materiality test Purpose: -Check list for model completeness -Comparison between companies The 25 catastrophic events are grouped into six broad categories

Financial Events Stock market crash 1987 Nikkei crash 1989 European currency crisis 1992 Interest rate scenario 1994 Russia/LTCM 1998 Stock market crash 2001

Life Insurance Scenarios Pandemic scenario Longevity

Property Catastrophes European windstorm UK flood US hurricane California earthquake New Madrid earthquake Japanese earthquake Japanese windstorm Other territories

Special Lines Catastrophes Aviation catastrophe Energy catastrophe Credit event

Other Man Made Catastrophes Terrorism event Industry event Nuclear event

Other Events Adverse loss developments Downgrading Company specific scenarios

Required Information Gross loss Net loss Breakdown of recoveries by major retrocessionaires Breakdown of gross loss by line of business Narrative describing the company’s assumptions

Stress Test for Reinsurers Is a complement to a company’s internal model Based on comprehensive set of events Based on standard set of events Each event is subject to a materiality test