The European insurance industry is to be subjected to an EU-wide stress test of its resilience and to identify any major vulnerabilities, the regulator has said.
EIOPA, the European Insurance and Occupational Pensions Authority, will conduct two separate test modules.
The ‘core’ module will test the resilience of insurers against two adverse market scenarios, one covering financial assets such as sovereigns, corporate bonds and equities, while the other will cover shocks to real estate asset prices and interest rates. These will be complemented by insurance-specific shocks relating to mortality, longevity, levels of reserves and catastrophic shocks.
The second module will examine the impact of a prolonged low-interest rate environment.
EIOPA said that firms accounting for at least 50% of the market share in each country will be tested, covering the life and non-life sectors.
EIOPA is also publishing the Solvency II Technical Specifications for the preparatory phase that will provide a basis for undertakings to value assets and liabilities and to calculate solvency/minimum capital requirements and own funds.
The exercise will be run in cooperation with national supervisory authorities
(NSAs), which will collect data from firms in July and then validate the
information before it is aggregated at the EU level. Results of the stress test analysis will be disclosed in November 2014.
EIOPA chairman Gabriel Bernardinosaid: “I believe that the design and the magnitude of the shocks will properly stress insurance companies’ financial position and that the conclusions of the exercise will allow EIOPA and NSAs to define areas for further investigation and to focus supervisory responses.”
The EIOPA press statement is available by clicking here
Further information on the stress tests is available by clicking here while information on the Solvency II technical specification is available here (registration may be required)