The level of risk is a combination of the impact that the risk will have
on the insurer and the probability of that risk materialising. The level
of risk borne by the insurer should be assessed regularly using
appropriate forward-looking quantitative techniques such as risk
modelling, 17 stress testing, including reverse stress testing, and
scenario analysis. An appropriate range of adverse circumstances
and events should be considered, including those that pose a
significant threat to the financial condition of the insurer, and
management actions should be identified together with the
appropriate timing of those actions. Risk measurement techniques
should also be used in developing long-term business and
contingency plans, where it is appropriate to the nature, scale and
complexity to do so.