Featured Product

    EIOPA Finalizes Methodological Principles for Insurer Stress Testing

    March 03, 2020

    EIOPA published a paper that sets out the main methodological elements, principles, and guidelines for an EU-wide stress testing exercise for insurers. The document will serve as a tool-box to inform and facilitate the design and execution phases of the EIOPA stress testing exercises. This methodological paper, which has been published post a stakeholder consultation, is part of a general enhancement of the EIOPA approach to stress testing from methodological and operational standpoints.

    Supervisory stress tests can be implemented through a top-down or bottom-up approach. This paper focuses on bottom-up or institution-run supervisory stress tests. The paper describes the micro- and macro-prudential objectives and approaches for stress tests, elaborates on the scope of a stress test exercise, covers scenario design, considers the calibration and application of specific shocks, and discusses the approaches to data collection and validation of the stress test results. The paper specifies requirements for data reporting and emphasizes that the set of templates used to report the results under the baseline and stressed scenarios should be as close as possible to the Solvency II QRT. The information requested in the stress test may be quantitative or qualitative. 

    Additionally, a reduction in the frequency of the EU-wide stress test exercises to a three-year cycle is expected to allow proper follow-up analyses of the stress test results and to better develop and follow-up on the recommendations issued. Between two stress test exercises, EIOPA will conduct focused sensitivity analyses and assessments of specific exposures through top-down and/or bottom-up approaches, thus reducing the burden on the industry. EIOPA plans to issue an additional paper on specific topics related to stress tests, such as the assessment of liquidity positions under adverse scenarios, the assessment of positions against transition and physical risks stemming from climate change and the potential approaches to multi-period stress tests. 

    Stress tests can provide additional insights and forward-looking perspective on the risk and vulnerabilities of insurers that cannot be derived from the regular Solvency II reporting. EIOPA conducts regular EU-wide stress test exercises for the insurance sector, in collaboration with ESRB. Currently, the methodology for EIOPA stress tests is specified separately for each exercise in technical specifications. Given the complexity involved in conducting EU-wide stress tests for insurers, having a set of pre-determined common methodological principles and guidelines can significantly facilitate the stress testing process. Therefore, EIOPA has developed this guide to serve as a tool-box to inform and facilitate the design and execution phases of the EIOPA stress testing exercises. 

     

    Related Link: Methodological Principles for Stress Testing

    Keywords: Europe, EU, Insurance, Stress Testing, Methodological Principles, Solvency II, Systemic Risk, Bottom-Up Stress Test, Reporting Template, EIOPA

    Featured Experts
    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796