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Outcomes of the 2021 General Insurance Industry Stress Test

Ken Nicholls, Roshane Samarasekera

In 2021 we expanded our regulatory stress test programme to include insurers for the first time. This first exercise, the 2021 General Insurance Industry Stress Test (GIIST), involved the five largest New Zealand incorporated general insurers who together accounted for over $5 billion in gross premium during the 2020 financial year, representing just over 70 percent of the New Zealand general insurance sector.

This test was not intended as a pass or fail exercise, instead its main purpose was to:

  • assess the resilience, in particular the solvency, of the large General Insurers to severe but plausible stress scenario(s);
  • improve stress test capability both in the industry and at the Reserve Bank; and
  • establish a framework for our future insurance stress testing

A common scenario and set of assumptions allowed us to compare results across insurers and aggregate the results to determine the effect on the sector, given the large market share of the participants.