EIOPA launched the 2021 stress test for the insurance sector in EU. Along with the adverse scenario from ESRB, EIOPA has published several documents, including technical specifications, reporting templates, factsheet, and questions and answers on the stress testing exercise. The deadline for submission of results to the national competent authorities is August 10, 2021. The stress test results are planned to be published in December 2021.
The 2021 stress test, for the first time, will complement the assessment of the pre- and post-stress capital positions with the assessment of the pre- and post-stress liquidity positions of the participants over a 90 day-time horizon. The stress test will evaluate impact on the capital and the liquidity positions of the undertakings in scope. The capital assessment relies on the Solvency II framework, while the liquidity assessment is based on the estimation of the sustainability of the liquidity position. The two components are based on a common narrative, a common scenario, a common set of shocks but are clearly separated in terms of application of the shocks, data collection, assessment and disclosure. The 2021 stress test focuses on a prolonged COVID-19 scenario in a “lower for longer” interest rate environment. The scenario, developed in cooperation with ESRB, will assess the impact of economic consequences of the COVID-19 pandemic, which affect confidence worldwide and prolong the economic contraction. The narrative is translated into a set of market and insurance specific shocks that generate a severe but plausible “double-hit” effect to the insurance industry.
Results will be collected through ad-hoc templates containing information to be used for analysis and validation purposes. The template for the capital component will rely to the maximum extent to the regular Quantitative Reporting Template, whereas templates for the liquidity component will be specifically developed. For the assessment of the capital position, as a general principle, the templates are be kept aligned to the regular Solvency II reporting where possible. For the liquidity component the information collected should cover the pre-and post-stress position. The information for analysis and validation purposes are kept to the minimum. The target sample defined in cooperation with the national competent Authorities encompasses 44 undertakings registered in 20 European jurisdictions and operating globally. The selected sample covers 75% of the EU-wide market based on total assets in the Solvency II.
Keywords: Europe, EU, Insurance, Reinsurance, COVID-19, Solvency II, Stress Testing, ESRB, EIOPA
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Banking Authority (EBA) published answers to 29 questions in the Single Rulebook Question and Answer (Q&A) tool in September.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards