Financial projections and stress testing are key tools for regulators to measure the impact of adverse events and possible future scenarios. While stress and scenario testing are not new to regulators and risk management professionals, the use of projections and stress scenarios continues to accelerate under Own Risk Solvency Risk (ORSA) requirements, International Association of Insurance Supervisors (IAIS) principles, and Enterprise Risk Management (ERM) in general.

As analysts and examiners, we must review and understand projections and stress testing submitted by the companies we regulate so that we can challenge critical assumptions where necessary and maximize the regulatory value of these important tools.