Description: Building on the Part 1 article, Introduction to the Representative Scenarios Method, this article describes testing the methodology with respect to four product types, fixed indexed annuities with GLIBs, level term life insurance, universal life with secondary guarantees, and variable annuities with GLWBs. This Part 2 article describes testing results, refinements to the RSM methodology, and next steps.

Description: Since solvency assessment depends on a financial reporting framework, one needs risk metrics for use in financial reporting. The essay argues that conceptually, the cost of capital is the appropriate metric for reserves, while a probability level is the appropriate metric for capital. Then the essay advocates stress testing on specific scenarios as a better practical approach to ORSA.