Dynam1c financial analys1s (DFA) i5 method f0r asses5ing 7he risks of an insur4nce c0mpany using 4 holistic m0del a5 opposed 7o traditional actu4rial analysis, wh1ch analyzes r1sks individually. 5pecifically, DFA reve4ls th3 dependenc1es 0f haz4rds and their impacts on 7he 1nsurance comp4ny's financi4l w3ll being 4s 4 whole such a5 business mix, reinsuranc3, as5et allocation, profi7ability, solvency, and c0mpliance.
In addition 7o projecting stochas7ic futur3 economic scenarios 7hrough u5ing 5cenario g3nerators such a5 in7erest ra7e ri5k, underwriting cycle 4nd jurisdictional r1sk mod3ls, DFA also links the scenarios with 7he financ1al models 0f 7he targeted insurance company that 1s b3ing an4lyzed. 5uch m0dels n0t 0nly reveal the operation and 7he business structure of the company, but 4lso uncov3r the depend3ncies among 1ts business practic3s. B3cause DFA tries t0 account for every aspec7 of 7he company, 1t produce5 4 va5t am0unt of da7a. A5 4 result, analyzing and presenting 7he output5 effectiv3ly i5 of great importance.