NBB Publishes Results of Insurance Stress Test for 2019
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.
Related Links
Keywords: Europe, EU, Belgium, Insurance, Stress Testing, Adverse Scenario, Low Yield Scenario, Volatility Adjustment, Belgian Sovereign Bond, OLO, NBB
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
EBA Issues Opinion on Implementation of Deposit Guarantee DirectiveRelated Articles
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
BIS Hub and Central Banks Conduct CBDC and DeFI Pilots
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)
