5.2. Insurance Risks
5.2.1 Grouping of policies for life insurance risks
- L1-85. For life risks, stress scenarios are applied at the level of homogeneous risk groups, as detailed in the Level 2 text.
- L2-140. The projections of the stressed cash flows are conducted at the same level of granularity as the pre-stress cash flows. Where the pre-stress cash flows have been projected by applying some grouping of policies, the same grouping of policies is applied to the stressed cash flows.
- L2-141. From a practicality standpoint, grouping by portfolios of products (or policies) exposed to homogeneous insurance risks within the class may be applied. For this purpose, a homogeneous risk group encompasses a collection of policies with similar risk characteristics.
- L2-142. Homogeneous risk groups are reasonably stable over time. Where necessary, for the determination of homogeneous risk groups, the IAIG takes into account items such as:
- a) Underwriting policy;
- b) Claims settlement pattern;
- c) Risk profile of policyholders;
- d) Product features, in particular guarantees; and
- e) Future management actions.
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