The scenarios for this insurance exercise will be different to the ones used for the banking exercise. Scenarios are chosen to reflect the risks and vulnerabilities of each sector. Tailored scenarios are needed to maximize their relevance. There is no read across from the set of parameters chosen for insurance stress testing to the set chosen for banking.
For insurance undertakings, natural catastrophes and a prolonged period of low interest rates would be two significant challenges to their resilience. In banking, the main vulnerabilities centre on the course of risk aversion, credit quality, balance sheet repair, and policy reforms.