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Static & Dynamic Solvency Testing

Discussion in 'SP2' started by Syst_Analyst, Sep 4, 2019.

  1. Syst_Analyst

    Syst_Analyst Member

    I'm Chapter 15 it talks about projecting solvency and dynamic vs static solvency testing.

    Simple question:

    Can a static solvency test be done on an ongoing basis? i.e. Allowing for new business plans.

    I know that a static solvency test is just a determination of solvency at a particular point in time. So if that time happens to be in the future I would assume it makes sense to factor in potential new business too? The reason I ask is because I would have thought projecting on an ongoing basic fits more naturally with a dynamic solvency test.

    Thanks
     
    Syst_Analyst, Sep 4, 2019
    #1
  2. Lindsay Smitherman

    Lindsay Smitherman ActEd Tutor Staff Member

    Hi - when the Core Reading talks about a 'static solvency test' I think that it is mainly referring to an assessment of current solvency.

    Having said that, I agree that if a company is doing a projection of its future solvency position, it makes sense for that to include allowance for the new business that it expects to write within the projection period. (But it could depend on the purpose of the projection.)
     
    Lindsay Smitherman, Sep 5, 2019
    #2

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