Insurance stress test 2014

Stress tests represent one of the regular supervisory tools that help to assess the resilience of the insurance sector to adverse situations and to extract valid conclusions to support the stability of the financial system

Objective

The aim of the exercise in 2014 is to test the resilience of insurers regarding market risk under a combination of historical and hypothetical scenarios. Additionally, insurance risk has been tested and, as a follow-up to its Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment, EIOPA also included a low yield element in the exercise. ​​

The exercise has two elements involving two different samples:

  • A Core Stress module focussed on group results covering asset price stresses, a set of insurance specific stresses and a qualitative assessment of entities’ responses to stress; and
  • A Low Yield module run entirely at individual level and focusing specifically on the impact of low interest rates as a follow-up to the EIOPA Opinion on the supervisory response to a prolonged period of low interest rates published in 2012.

Stress test results

Some of the findings show that insurance sector is in general sufficiently capitalised in Solvency II terms,  14% of companies (representing 3% of total assets) have a Solvency Capital Requirement (SCR) ratio below 100% and
the sector is more vulnerable to a “double hit” stress scenario that combines decreases in asset values with a lower risk free rate.

To learn more, please read:

Working Process​

The exercise was run in close cooperation with the national supervisory authorities: the NSAs identifed and contacted prospective participants in the test.
On 31 March, EIOPA invited insurance and actuarial associations (Insurance Europe, CRO Forum, AMICE, Actuarial Association of Europe, CFO Forum) to provide useful comments on stress test reporting templates. The objective of this consultation was to improve the usability of the templates and to allow for early understanding of the stress test shape and requirements.

Q&A on EIOPA technical specifications

For Q&A on EIOPA technical specifications for the preparatory phase click here.

Related documents library