EIOPA Issues Technical Specifications for Market and Credit Risk Study
EIOPA published the technical specifications, including instructions, for the market and credit risk modeling comparative study for year-end 2019. The instructions provide directions to the insurance undertakings participating in the annual, Europe-wide comparative study on the internal modeling of market and credit risk on financial instruments. In this edition, the study will include a focus on the interest rate risk modeling. Insurance undertakings using an internal model covering market risk and holding material exposure to the Euro-denominated investments are expected to take part in the study. Participants are required to submit the relevant information to their national supervisory authorities by May 31, 2020. The national authorities, in turn, must report this information to EIOPA by June 30, 2020.
Market risk contributes significantly to the overall solvency capital requirement (SCR) of insurance undertakings. The key objective of this study is to compare risk charges for a selection of asset portfolios to be used as a tool for the supervisory review of internal models. The study also aims to highlight the causes of potential differences between internal models by analyzing risk charges for individual asset classes such as fixed income or equity. Appendix 1 to the instructions provides an overview on which response templates have to be filled in for which model types. Participants are requested to follow the instructions for filling out the data request, using the provided answer templates.
The previous editions of this study targeted the combined market and credit risks, with the ambition to resolve some shortcomings and to improve the tools to reflect the typical model choices encountered in practice. The comparative study for year-end 2019 is largely based on the previous edition. A section (Section IV.1 ) of the instructions document explains the changes from the study for year-end 2018 to the current study. EIOPA expects to publish the conclusions of the study within one year following the end of the data collection, in an aggregated form, to avoid the identification of individual participants.
Related Links
Keywords: Europe, EU, Insurance, Securities, SCR, Market Risk, Credit Risk, Solvency II, Interest Rate Risk, Internal Model, Financial Instruments, EIOPA
Featured Experts
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
Brian Robinson
Actuary; risk management specialist; corporate and capital modelling expert
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
