Botswana: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis for Insurers and Retirement Funds
IMF Staff Country Reports, March 5, 2024
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- Botswana: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis for Insurers and Retirement Funds
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Bibliographic details
- Published: March 5, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400269240.002
Overview
- The FSAP mission conducted a risk analysis for large insurance companies and retirement funds.
- The analysis built on the narrative of the adverse macrofinancial scenario also used in the banking stress test (ST).
- For the insurance sector the focus of the analysis was on solvency.
- For retirement funds, future pension values were modeled after a materialization of the adverse scenario in the first two years of the projection horizon.
Methodology and Scenarios
- Stress testing approach:
- Adverse macrofinancial scenario aligned with the banking ST narrative.
- Sensitivity analyses conducted, including interest rate shocks, currency shocks, and the default of the largest banking counterparty.
- Retirement funds modeling:
- Future pension values modeled following materialization of the adverse scenario in the first two years of the projection horizon.
- Modeling approach:
- Top-down modelling applied to insurers and retirement funds.
Sample and Coverage
- Sample composition:
- Four life insurers.
- Four short-term insurers.
- Four retirement funds.
- Market coverage:
- Between 80 and 95 percent in each sector.
Data Issues and Limitations
- Incomplete reporting data complicated the top-down modelling, specifically with regard to:
- The geographical breakdown of investments for insurers.
- The valuation of insurance liabilities.
Content in this bundle
- 1bwaea2024003