Casualty Actuarial Society Dynamic Financial Analysis Handbook

Dynamic financial analysis (DFA) is the process by which an actuary analyzes the financial condition of an insurance company. Financial condition refers to the ability of the company’s capital and surplus to adequately support the company’s future operations through an unknown future environment. The process of DFA involves testing a number of adverse and favorable scenarios regarding an insurance company’s operations. DFA assesses the reaction of the company’s surplus to the selected scenarios. The assessment is contained in the DFA report. The purpose of the Handbook is the provide suggestions and guidance to actuaries in performing DFA studies. The Handbook is not a Standard of Practice and is not binding upon any actuary.