1. CMHC`s Stress Test Exercise and Earthquake Risk
Housing Finance Symposium October 4, 2016

2. Background
CMHC conducts Corporate-Wide Stress Testing to assess its financial solvency and operational resiliency through extreme but plausible events
Catastrophic events such as earthquakes are among the key scenarios considered
CMHC mortgage insurance does not cover physical damage to structures from earthquakes

3. Scenario narrative and Economic impact
Earthquake Scenario
Scenario narrative and Economic impact
An earthquake event leads to substantial property damage, including to telecommunications and transportation infrastructure
There is material disruption to regional business operations that lasts for several quarters until the infrastructure is repaired. A decline in housing prices is triggered
Despite the stimulus provided from reconstruction spending, the disruption to business operations, hit to the insurance sector and damage to consumer and investor confidence mean that it takes several years for the Canadian economy to recover properly

4. Earthquake – Key Severity Metrics
Base – earthquake-impacted region Base – Canada
Earthquake – earthquake-impacted region Earthquake – Canada

5. Earthquake – Key Severity Metrics

6. Summary Impacts
Regional impacts are the primary focus, however National impacts are likely in the short and medium-term
It is of note that CMHC mortgage insurance does not cover physical damage to structures from earthquakes, however mortgage insurance claims could increase as a result of secondary ``ripple`` effects of an earthquake
Stress Testing results indicate that CMHC is well capitalized and would remain solvent following a catastrophic earthquake event
Assessment of operational impacts is an ongoing activity