EIOPA Issues Recommendations Post Insurance Stress Tests
The European Insurance and Occupational Pensions Authority (EIOPA) issued recommendations to supervisors and insurers, based on the lessons learned from the 2021 insurance stress test.
The recommendations to supervisors and insurers address identified vulnerabilities, actions to manage adverse conditions, suggestions applicable to specific undertakings. The recommendations constitute the aggregation of discussions and assessments of the individual stress test results of the 43 European insurance groups and one solo insurance undertaking that participated in the 2021 insurance stress test of EIOPA. EIOPA recommends the following key actions for national competent authorities:
- Consider whether undertakings still reliant on transitional measures are taking concrete actions to reduce their dependency on measures introduced only to smooth the transition from the Solvency I to the Solvency II regime
- Assess if the exposure to risks that cause either a large drop in Solvency Capital Requirement (SCR)-ratio or a (near) breach of SCR-ratio is adequately managed
- Verify that undertakings allocate sufficient resources to ensure that their risk frameworks and models are sufficiently flexible to assess those risks that are not reported as part of the Solvency II reporting framework, particularly focusing on their ability to produce and process relevant data
- Further investigate (for undertakings that did not apply management actions, even though they were warranted), the reasons for not applying management actions and if these undertakings have sufficient options to apply management actions in case of need
- Further assess the viability and reported impact of the management actions (for undertakings that have applied such actions) in case the applied actions deviated from what was discussed in the pre-validation phase—applies to undertakings that relied on intra-group support or where there is interconnectedness with the banking sector)
- Assess the time it would take for undertakings to respond to adverse developments—including assessment of the decision-making processes, the ability to gather necessary information in a short timeframe, and the flexibility and adequacy of models used by the undertakings to produce required results
- Supervisory actions, including on-site inspections, if needed, regarding one of the participants based on the information provided in the validation process
Keywords: Europe, EU, Insurance, Stress Testing, Recommendations, Solvency Capital Requirement, Solvency II, Reporting, EIOPA
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.
Previous ArticleEBA Publishes Standards Under Internal Approach for Market Risk
CFPB Finalizes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.
BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023
The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
US Congress Report Examines Data Privacy and Cybersecurity Regulations
The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
EU to Conduct One-Off Scenario Analysis to Assess Transition Risk
The European authorities recently made multiple announcements that impact the banking sector.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.