EIOPA launches 2021 insurance stress test

EIOPA launches 2021 insurance stress test

The European Insurance and Occupational Pensions Authority (EIOPA) has launched its 2021 insurance stress test for the European insurance market. The 2021 test focuses on a prolonged coronavirus (COVID-19) scenario, in a ‘lower for longer’ interest rate environment. It aims to assess the resilience of the European insurance market in case of adverse financial and economic conditions and identify the market’s vulnerabilities.

The scenario, developed in co-operation with the European Systemic Risk Board (ESRB), will assess the impact of economic consequences of the COVID-19 pandemic, which affect confidence worldwide and prolong the economic contraction. The stress test will evaluate both the impact on the capital and the liquidity position of the undertakings in scope.

The objectives of the 2021 stress test are:

• to assess the resilience of participants to adverse scenarios from a capital and liquidity perspective

• to provide supervisors with information on whether the insurers are able to withstand severe but plausible shocks

• to consider possible recommendations to the industry and to allow supervisors to engage with insurers on potential remedial actions

• to complement the microprudential assessment with the estimation of potential spill-over from the insurance sector triggered by widespread reactions to the prescribed shocks

The 2021 exercise includes 44 European (re)insurance undertakings. The companies were selected based on size, EU wide market coverage, business lines conducted (life and non-life business), number of represented jurisdictions and local market coverage.

In total the target sample, defined in co-operation with the national competent authorities, covers 75% of the European Economic Area based on total assets in the Solvency II framework.

EIOPA is now carrying out a Q&A process to provide further clarifications to participants. The stress test results are planned to be published in December 2021. 

Source: EIOPA launches its 2021 insurance stress test

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