Litmus Analysis today announced the launch of LitmusQST, a ‘plug and play’ service for insurers and reinsurers looking to stress test the credit profile of their insurance and reinsurance counterparties.
The service is an extension of their (re)insurer financial profiling and credit scoring application LitmusQ, which is used in the counterparty credit and market security departments of a growing number of major (re)insurers and brokers.
Litmus’ Head of Analytics, Stuart Shipperlee, said “During the last year we have been working with some major reinsurers to analyse the impact of a highly stressed loss year on the credit profile of their retrocessionaires. We’ve developed this into an approach whereby we can offer a set of standardised or bespoke stressed outcomes on most types of non-life (re)insurer based purely on publicly available information.
Any, or all of the major sources of potential stress can be applied, including market risk, credit risk, extreme cat loss events and reserving shocks. The results are fully transparent and easy to follow – we show the balance sheet impact of each component and how these combine to impact the credit profile”.
Shipperlee continued “LitmusQST was an obvious next step, bringing our credit analysis experience to clients in a package that includes logically developed stress tests on a panel of reinsurers, coupled with the ability for the client to change or add additional insurers and reinsurers, and to easily adapt the stress test parameters working with our analysts”.
Litmus founder Peter Hughes added “The UK regulators’ CRO and CEO letters last year highlighted to us how important this kind of work is becoming, and the realisation that it could be a challenge that many insurers would spend a lot of management time trying to deliver. Our service is an efficient, objective and transparent solution that can be used with regulators and by internal risk management alike”.