May 14, 2018

EIOPA launched the fourth stress test exercise for the insurance sector in Europe. Along with the adverse scenario from ESRB, EIOPA published several documents, including technical specifications, explanatory note, templates, and frequently asked questions on the stress testing exercise. The deadline for submission of results to the national competent authorities is August 16, 2018. The publication of the stress test results is planned in January 2019.

The 2018 EIOPA insurance sector stress test will include three stress scenarios. Two of these scenarios aim to analyze the impact of a combination of market and insurance stresses, while the third focuses on specific natural catastrophe events. EIOPA will develop the insurance-specific components of the stress scenarios (such as lapses, longevity, or catastrophe events) while ESRB will provide the two capital market stress scenarios. Scenario 1 is the "yield curve up" scenario combined with a stress on lapses and claims inflation (targeting non-life claim provisions). Scenario 2 is the "yield curve down" scenario combined with lapse and longevity stresses. The capital market stress scenarios were calibrated independently of the additional insurance elements of the scenarios being developed by EIOPA. The reference date for the insurance stress test for 2018 is December 31, 2017.

The stress test templates reproduce, to the extent possible, the Solvency II regular templates used for supervisory reporting. The stress test templates and specifications explicitly identify the information additionally required for the stress test. Information, which is required for supervisory reporting, but is either simplified or not required for the stress test, has been also identified. The target sample for this year includes 42 European insurance groups representing nearly 78% of the European market based on consolidated assets. EIOPA, in cooperation with ESRB, initiates and coordinates the EU-wide stress tests to assess the resilience of financial institutions within its remit to adverse market developments. ECB, in collaboration with ESRB, has developed the narrative and methodology and calibrated the adverse scenarios for the 2018 exercise.

 

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Keywords: Europe, EU, Insurance, Solvency II, Stress Testing, EU-wide Stress Test, ESRB, EIOPA

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