EIOPA launches 2021 stress test
The European Insurance and Occupational Pensions Authority (EIOPA) has launched its 2021 insurance stress test. 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.
Like this year’s European Banking Authority (EBA) stress test, which kicked off in February, the test assumes a ‘lower for longer’ interest rate environment of the type that could be seen in the aftermath of the Covid-19 pandemic. It includes 44 European (re)insurance undertakings, and its objectives are to assess the resilience of participants to adverse scenarios from a capital and liquidity perspective; to consider possible recommendations to the industry and to allow supervisors to engage with insurers on potential remedial actions; and to complement the microprudential assessment with the estimation of potential spill-over from the insurance sector.
As EIOPA Vice-Chair Peter Braumüller noted: “The scenario reflects severe but plausible shocks and will bring results that will shed light on the resilience of the European insurance sector. However, [it] should not be considered a pass-or-fail exercise.”
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