APRA focus on cat risk

Question 1

What focus on cat model?

Answer 1

1 data 2. model 3. sensitivity to assumption 4. perils not in the model

Question 2

Why high capital requirement in catastrophe risk?

Answer 2

Concentration risk: horizontal and vertical

Question 3

Evaluation framework of cat modeling

Answer 3

exposure and their drivers, vulnerability, financial consequence

Question 4

what is resolution plan

Answer 4

if recovery is not possible (firm likely to fail, or fails)

Question 5

What is recovery plan

Answer 5

timely action, survive a crisis.

Question 6

APRA comments on recovery plan

Answer 6

assess impact on capital, funding position, share price, credit ratings. should be a menu of actions

Question 7

recovery: asset inflow

Answer 7

capital, liquidy

Question 8

recovery: liability outflow

Answer 8

reduce size of B/S,

Question 9

Liquidity risk for banks

Answer 9

deposit run-off, rating downgrade, funding shock, market downturn

Question 10

liquidity risk for life insurer

Answer 10

mass surrender, rating downgrade, lines of credit, market downturn