I understand you didn’t calculate VA before 2015, but is there a way to understand the magnitude of the impact of the Italian country VA in times of crisis (like in the sovereign crisis)?

On the excel document I reference, I have the impression that you calculated VA at year end 2013 for the purpose of the stress test in 2014. I can see EUR VA was calculated as 22 by EIOPA, while Italy was 47. Is it a data that I can go by or were these calculations still at preliminary stage and the methodology is too different today to use the data?

If I use the earliest published portfolio composition, before the composition change in September 2016, I can’t spot any additional country VA to the currency VA on 31/12/2013. Do you think my calculation isn’t correct or that the methodology used for the stress test is too different to be compared?

EIOPA answer

The methodology that we currently use to calculate the VAs was only finalised at the beginning of 2015. The VAs provided for the insurance stress test 2014 were derived when the methodology was still under development and may differ from what the current methodology would have produced. You can find a note summarising the calculation of the VAs for the insurance stress test at the following link.

If you are interested in the how the current VAs would react in a crisis situation then the results of the insurance stress test 2016 may be more relevant for you. The VAs provided for that test were produced with the current methodology. The VAs for the stress scenarios are based on the asset stresses for those scenarios. The VAs are not stated explicitly in the specifications, but you can easily derive them as the difference between the risk-free interest rates with and without the VA for low maturities (see link).