accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...

, a financial condition report (FCR) is a report on the solvency condition of an insurance company that takes into account both the current financial status, as reflected in the balance sheet, and an assessment of the ability of the company to survive future risk scenarios. Risk assessment in an FCR involves ''dynamic solvency testing'', a type of

dynamic financial analysis Dynamic financial analysis (DFA) is a simulation approach that looks at an insurance enterprise's risks holistically as opposed to traditional actuarial analysis, which analyzes risks individually. Specifically, DFA reveals the dependencies of haza ...

that simulates management response to risk scenarios, to test whether a company could remain solvent in the face of deteriorating economic conditions or major disasters. Dynamic solvency testing may involve both ''deterministic projections'', based on known risks, and ''stochastic projections'' that include random risk events. FCRs are a part of the statutory reporting requirements for life insurance companies in Pakistan, Australia, New Zealand, Ghana and non-life insurance companies in Canada. FCRs are also required in the UK under the ''Financial Services and Markets Act'' of 2000 and in Ireland. While many consider FCRs a type of

compliance Compliance can mean: Healthcare * Compliance (medicine), a patient's (or doctor's) adherence to a recommended course of treatment * Compliance (physiology), the tendency of a hollow organ to resist recoil toward its original dimensions (this is a ...

report, they can also be useful for corporate management to identify weaknesses in risk strategy, to test diversification of risk through, e.g.,

reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own insu ...

, and to set fair market pricing for

option Option or Options may refer to: Computing *Option key, a key on Apple computer keyboards *Option type, a polymorphic data type in programming languages *Command-line option, an optional parameter to a command *OPTIONS, an HTTP request method ...

References

{{reflist Financial statements Financial risk management Actuarial science