NBB published a presentation on the results of the 2019 stress tests on insurance undertakings. Also published was the data on the seven Belgian insurance companies that have participated in all parts of the NBB insurance stress test for 2019. Overall, the results of the exercise reveal that the largest Belgian insurance companies are resilient toward increases in Belgian sovereign bond (OLO) spread. Most insurers have risk mitigation techniques in place to mitigate some of the impact (spread lock derivatives, retaining foreseeable dividends).
In 2019, a significant part of the Belgian insurance sector was subject to a stress test consisting of two scenarios. The first scenario (Belgian Adverse) assessed the impact of a repricing of the Belgian sovereign debt on the solvency positions of insurers. The Belgian Adverse scenario consisted of three parts: 100 basis points increase of the OLO spread; 200 basis points increase of the OLO spread; and the Reverse stress, whereby the insurer has to determine the OLO spread increase at which its solvency ratio drops below 100%. The second scenario (Low Yield) assessed the impact of a continued decline in the risk-free rates on the solvency positions of insurers. The aim of the stress test was to assess the impact of OLO spread increase on the solvency of the largest Belgian insurers and to assess the functioning of the volatility adjustment mechanism, should an idiosyncratic OLO spread increase occur.
Keywords: Europe, EU, Belgium, Insurance, Stress Testing, Adverse Scenario, Low Yield Scenario, Volatility Adjustment, Belgian Sovereign Bond, OLO, NBB
Previous ArticleEBA Issues Opinion on Implementation of Deposit Guarantee Directive
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.
The Hong Kong Monetary Authority (HKMA) announced that the applicable jurisdictional countercyclical capital buffer (CCyB) ratio for Hong Kong remains unchanged at 1.0%
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.