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A KPMG SA survey of 39 insurance entities from 2015 to 2020

A KPMG SA survey of 39 insurance entities from 2015 to

Testing an insurer’s resilience using stress and scenario tests – a KPMG SA survey of 39 insurance entities from 2015 to 2020.

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a KPMG SA survey of 39 insurance entities from 2015 to 2020

I have a list of pages that I need to update pages on the Namibia, SA & Bots website that are scheduled for deactivation global pandemic, a plummet in the equity market and national policy changes are all factors beyond our control and which easily stir a perfect storm. Whilst the effects of this storm are far reaching, it’s a poignant reminder that we’re all in the same ocean but not everyone is in the same boat.

This is a metaphor that has spread rapidly during the current outbreak and is always relevant to the insurance industry. Stress and scenario testing are much like performing checks to ensure that your boat is seaworthy under extreme weather conditions and that all safety equipment is in good working condition in case a storm hits.

Within the sample we considered, only three of the sixteen ORSA reports that included scenario tests, included a pandemic scenario. The others considered the impact on mortality/morbidity alone or alongside market risk. None of these scenarios considered the far-reaching effect of cross-sectional risks that we are currently observing in the current Covid-19 pandemic: share prices decreased and volatility increased, interest rates reduced, mortality rates increased, higher claims levels for certain non-life insurance policies, increased phishing attacks, domestic currency weakness and higher forex volatility, operational challenges, lower new business volumes and payment holiday.

Given that the companies did not consider all these risks occurring simultaneously, it is likely that the impact of pandemic type scenarios was significantly under-estimated. A pandemic might not make the business model unviable, but we have seen how severely it can rock the boat and truly test a business’ resilience.

© 2021 KPMG Services Proprietary Limited, a South African company with registration number 1999/012876/07 and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


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