Featured Product

    EIOPA Finalizes Methodological Principles for Insurer Stress Testing

    March 03, 2020

    EIOPA published a paper that sets out the main methodological elements, principles, and guidelines for an EU-wide stress testing exercise for insurers. The document will serve as a tool-box to inform and facilitate the design and execution phases of the EIOPA stress testing exercises. This methodological paper, which has been published post a stakeholder consultation, is part of a general enhancement of the EIOPA approach to stress testing from methodological and operational standpoints.

    Supervisory stress tests can be implemented through a top-down or bottom-up approach. This paper focuses on bottom-up or institution-run supervisory stress tests. The paper describes the micro- and macro-prudential objectives and approaches for stress tests, elaborates on the scope of a stress test exercise, covers scenario design, considers the calibration and application of specific shocks, and discusses the approaches to data collection and validation of the stress test results. The paper specifies requirements for data reporting and emphasizes that the set of templates used to report the results under the baseline and stressed scenarios should be as close as possible to the Solvency II QRT. The information requested in the stress test may be quantitative or qualitative. 

    Additionally, a reduction in the frequency of the EU-wide stress test exercises to a three-year cycle is expected to allow proper follow-up analyses of the stress test results and to better develop and follow-up on the recommendations issued. Between two stress test exercises, EIOPA will conduct focused sensitivity analyses and assessments of specific exposures through top-down and/or bottom-up approaches, thus reducing the burden on the industry. EIOPA plans to issue an additional paper on specific topics related to stress tests, such as the assessment of liquidity positions under adverse scenarios, the assessment of positions against transition and physical risks stemming from climate change and the potential approaches to multi-period stress tests. 

    Stress tests can provide additional insights and forward-looking perspective on the risk and vulnerabilities of insurers that cannot be derived from the regular Solvency II reporting. EIOPA conducts regular EU-wide stress test exercises for the insurance sector, in collaboration with ESRB. Currently, the methodology for EIOPA stress tests is specified separately for each exercise in technical specifications. Given the complexity involved in conducting EU-wide stress tests for insurers, having a set of pre-determined common methodological principles and guidelines can significantly facilitate the stress testing process. Therefore, EIOPA has developed this guide to serve as a tool-box to inform and facilitate the design and execution phases of the EIOPA stress testing exercises. 

     

    Related Link: Methodological Principles for Stress Testing

    Keywords: Europe, EU, Insurance, Stress Testing, Methodological Principles, Solvency II, Systemic Risk, Bottom-Up Stress Test, Reporting Template, EIOPA

    Featured Experts
    Related Articles
    News

    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.

    January 04, 2023 WebPage Regulatory News
    News

    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.

    January 01, 2023 WebPage Regulatory News
    News

    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.

    December 30, 2022 WebPage Regulatory News
    News

    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.

    December 29, 2022 WebPage Regulatory News
    News

    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.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    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.

    December 22, 2022 WebPage Regulatory News
    News

    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.

    December 22, 2022 WebPage Regulatory News
    News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News
    News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697