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
Cassandra Hannibal
Life insurance actuary; risk management and economic capital specialist
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
Previous Article
EBA Publishes Report on Adoption of Big Data and Advanced AnalyticsRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
