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Dynamic Solvency Tests

J

JamesCarlyle

Member
Hi,

The notes state that dynamic solvency tests involve projecting revenue accounts and balance sheets for a sufficient number of years for the full effect of risks to become apparent.

They also say: a less resource intensive test is to only project the revenue account, assessing if assets run out before the last contract goes off.

What exactly are the revenue account and the balance sheet and why is it less resource intensive to only project the revenue account?

Thanks!

James
 
sounds a bit ambiguous, but sounds like it's referring to with or without reserves.
You could just project cashflows to check you have money to pay claims. Or you could also include setup (and release) or reserves/capital to check you can meet statutory solvency requirements too. The latter would obviously require more work/things to model.
 
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