The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has recently published the findings of its EU-wide stress test exercise for the insurance sector. To view the findings, please click here.
CEIOPS announced its intention to carry out the stress tests in October 2009. Please click here to view our previous blog on this issue. The stress tests were designed to provide EU policymakers with information to help them assess the insurance sector's resilience to financial shocks and to improve supervision. Participating insurance groups were asked to calculate the impact of stresses on their solvency ratios under three different scenarios: the first scenario was intended to reflect the developments in the capital markets between September 2008 and September 2009; the second scenario was intended to reflect a more severe and prolonged recession; and the third scenario was intended to reflect a sudden inflation.
The exercise included 28 large European insurance groups, representing approximately 60% of gross premiums of the European insurance sector. The results of the exercise indicate that the larger European insurance groups would remain resilient even in severe scenarios. In all the scenarios, the aggregated level of available capital exceeded the regulatory requirements. In the first scenario, the exercise resulted in a marginal impact of a loss of €10 billion, representing a 3% reduction in the available capital of the participating groups. The impact on available capital was considerably higher in the other two scenarios with a reduction of up to 25% of the available capital of the participating groups. However, in all three scenarios the participating insurance groups held assets sufficient to cover policyholder liabilities.