The European Insurance and Occupational Pensions Authority (EIOPA) launched its latest stress test on 14 May 2018 which will include an assessment of Europe’s major insurance groups’ exposure to cyber risk. 42 European insurance groups, which together are said to represent 78% of total European market coverage, will be participating in the test. The insurance groups have been selected based on their size, relevance to overall financial stability and market coverage.
EIOPA commented that "cyber risk has been gaining momentum as a growing concern for institutions, individuals and the market" and "cyber risk is currently considered as one of the main emerging risks as it climbed to the top position in the list of global risks for business in less than five years".
The stress test will also include three scenarios which will examine the impact of environmental catastrophe and extreme weather events across Europe as well as the impact of a rise and fall in interest rates. The EIPOA chairman, Gabriel Bernardino, explained that the test is designed to assess insurers’ response to "severe but plausible external shocks, including insurance specific shocks". Mr Bernardino also commented that this is the first time that exposure to cyber risk and best practices in dealing with these risks has been assessed.
Insurers will need to submit their completed questionnaires to the regulators by 16 August 2018. EIOPA anticipates that the results of the stress test will be published in January 2019. According to EIOPA, the test is designed to raise awareness of potential threats to financial stability and assess potential vulnerability of the European insurance market in certain scenarios. Gabriel Bernardino expects that the stress test will provide "further valuable insight to the resilience of the European insurance sector" as well as "increase transparency to ensure a level playing field and enhance market discipline among the stress test participating groups".