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FSA stress tests life offices

The FSA subjected life assurance companies to stress tests earlier this year in order to judge the level of resilience of their capital bases, according to press reports.

The tests reviewed insurers’ resilience if equity values declined 20 per cent over 2009, as well as a 15 per cent drop in property values, a 0.5 per cent increase in yields on corporate bonds and a 0.5 increase or decline in interest rates.

The stress tests were designed to simulate a 1980’s-style ‘V’ recession scenario, which is considered a downtown “with a reasonably rapid recovery.”

Although most markets have performed better than the life assurance tests so far this year, most of the data was collected in early March, about the same time as the FTSE 100 saw a decline of 23 per cent for the year, according to Bloomberg data reported in the Financial Times.

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  1. Nothing to worry about then?
    The FSA has given the all clear, so when will the first one fall over?

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