Featured Product

    EIOPA Publishes Results of Study on Market and Credit Risk Modeling

    March 18, 2019

    EIOPA published a report presenting the results of a comparative study on market and credit risk modeling in the insurance sector. The report summarizes key findings from the study undertaken in 2018 (and based on year-end 2017 data) and provides insights into the supervisory initiatives being undertaken following the conclusions of this study. The study is intended to further develop and refine European comparative studies as a supervisory tool in the area of market and credit risk modeling. The aim is also to support the supervision of models and foster convergence of supervisory approaches, given the potential choices of mathematical, statistical, and IT solutions to tailor models to the concrete risk profile.

    The overall results show significant variations in asset model outputs, which could be partly attributable to model and business "specificities" already known by the relevant national competent authorities, but also indicate a certain need for further supervisory scrutiny. This report is part of an ongoing process of monitoring and comparing internal market and credit risk models. The study focused on euro-denominated instruments. The 19 participants from 8 different member states cover 98.5% of the Euro investments held by all undertakings with an approved internal model, covering market and credit risk in the European Economic Area. The study focused on drivers for the value of investments, but did not aim to cover the overall solvency capital requirement (SCR). 

    Market and credit risk contribute significantly to the SCR of insurance undertakings and are of material importance for the majority of internal model undertakings. Consequently, the EIOPA Board of Supervisors decided to perform annual European-wide comparative studies on the modeling of market and credit risks, to be run by a joint project group of several national competent authorities and EIOPA, to continue the study based on year-end 2015 data. Undertakings with a significant exposure to assets denominated in Euro and an approved internal model covering market and credit risk take part in this annual study. 

    Refinements and developments since the last study will be further developed already with the next study. The results, tools, and experience will be feeding in the Supervisory Review Process (SRP) on internal models and vice versa. The findings indicate the need for further supervisory scrutiny, including at the European level. Consequently, EIOPA has decided to perform regular annual studies to further develop supervisory tools and foster consistency of supervisory approaches.

     

    Related Link: Report (PDF)

     

    Keywords: Europe, EU, Insurance, Solvency II, SCR, Market Risk, Credit Risk, Internal Models, EIOPA

    Featured Experts
    Related Articles
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004