## 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_

## Source details

**Canonical URL:** [Botswana: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis for Insurers and Retirement Funds](https://www.imf.org/en/publications/cr/issues/2024/03/05/botswana-financial-sector-assessment-program-technical-note-on-stress-testing-and-systemic-545513)

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## Bibliographic details
- Published: March 5, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400269240.002

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### 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.

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_Source: https://www.imf.org/en/publications/cr/issues/2024/03/05/botswana-financial-sector-assessment-program-technical-note-on-stress-testing-and-systemic-545513_