Stress Testing – Confluence of the Actuaries and Economists Viewpoints in the New Economic Environment
Actuaries Summit 2017
An integral part of stress testing is understanding where vulnerabilities to macroeconomic shocks lie. This is however a challenging problem.
Key challenges include
- Lack of data to calibrate models
- Changes in the business and macro-economic environment which mean that the use of historic experience may not be valid.
In this presentation we look at different approaches to tackling this challenge. We take in the viewpoint of both actuaries and economists. The actuary is often tasked with translating a specific shock or adverse scenario of the world into forecasts of financial metrics. Economists can provide an important perspective on how scenarios can work itself through the segments of the economy, and the potential responses of different economic agents.
The current environment is continuing to evolve. We are in an unprecedented low interest environment. The speed of information flow is rapid amongst both other institutions as well as consumers. Further capital and liquidity flows are global and can turn on or off very rapidly. The impact of new and agile disruptors who may be service provider or competitors also needs to be considered.
This is a continuously evolving area where close cooperation between experts with different viewpoints and backgrounds can provide greater insights, and help understand the impact from macro-economic scenarios.
This presentation can be found here.
About the presenters
Don is a qualified actuary and a Director in our Actuaries & Consultants practice. He has over 20 years of experience in financial services in Australia, USA and UK with an emphasis on general insurance. He has worked in personal and commercial lines general insurance, reinsurance, life insurance and banking and has been responsible for pricing, valuations, capital modelling, mergers & acquisition support as well as internal and external audits and peer reviews. He also has experience in financial services conduct risk and remediation relating to inappropriate advice and mis-selling.
Martin is a Director within the Financial Services Actuarial Consulting team. He has over 21 years’ experience in the financial services industry in Australia and Asia. He has been CFO, Chief Actuary and Appointed Actuary for a number of life insurers. Martin specialises in life insurance capital and solvency assessment as well as actuarial modelling efficiencies and design (especially in Prophet). He has a deep knowledge of ICAAP and LAGIC.
Sen is a Director in Consulting and part of the Actuaries and Consultants group. Sen has worked with clients in banking, life insurance and wealth management. His areas of expertise include quantitative modelling for banks, capital management, advanced analytics, and business valuations. Sen has completed projects covering credit risk model development and validation, stress testing process and technology, core banking system reviews, and valuation of mortgage portfolios.
Mike Thomas is an experienced economist with broad-based expertise gained over two decades of practice, having joined Access Economics (now Deloitte Access Economics) in 2007, after 15 years working as an economist in financial markets with Credit Suisse First Boston, NM Rothschild Australia and ICAP. He has managed projects in all sectors of the economy, concentrating in recent years on financial sector issues. Mike has worked extensively with the industry, the industry peak bodies and government. He is DAE’s lead client service director for Financial Services and co-authored Deloitte’s submission to the Murray Financial System Inquiry.
Kristian leads the Macroeconomic Forecasting and Policy team in Sydney. He specialises in the application of macroeconomic analysis and forecasts with regard to economic scenario analysis, transaction due diligence work, corporate strategy and policy development.