Regulator launches new European insurance stress test

The European Insurance and Occupational Pensions Authority (EIOPA) has launched its fourth stress test for the European insurance sector which aims to assess insurers’ vulnerabilities.

EIOPA said 42 European insurance groups will participate in this year's exercise, representing nearly 78 percent of the total European market coverage. EIOPA, in coordination with the national competent authorities, selected the companies according to size, European Union-wide and local market coverage as well as relevance for financial stability.

The 2018 stress scenarios encompasses a combination of market and insurance specific risks, including a natural catastrophe scenario and the exposure to cyber risk. For each stress test, EIOPA has tailored the scope and scenarios according to developments in market conditions and their potential negative implications for insurers.

EIOPA's fourth insurance stress test aims to assess vulnerabilities of the European insurance sector to specific adverse scenarios with potential negative implications for the European financial markets and the real economy.

It intends to raise awareness of the potential threats to financial stability posed by the insurance sector at the European level and increase transparency by requesting the voluntarily disclosure of individual results by participating groups.

Gabriel Bernardino, chairman of EIOPA, said: “The scenarios reflect severe but plausible external shocks including insurance specific shocks. Furthermore, for the first time the exposure to cyber risk and best practices in dealing with these risks is assessed.

"This stress test will therefore provide further valuable insight to the resilience of the European insurance sector. The increased transparency is key to ensure a level playing field and enhance market discipline among the stress test participating groups.”

The deadline for submission of results to the national competent authorities is Aug. 16, 2018. The publication of the stress test results is expected in January 2019.

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