EIOPA has published the results of the second stress test on insurers. EIOPA has published the results of stress tests on the insurance market in 2014, which aims to assess the overall strength of insurance companies and identify their main vulnerabilities.
The exercise is divided into two parts:
- The Core module, which focuses on the results of the entities on a consolidated basis, includes stress situations in asset prices, specific stress scenarios of insurers and qualitative analysis.
- The Low yield module, conducted at the individual level, analyzes the impact from a prolonged low interest rate period.
The stress test shows that, in the current environment, entities have strong capitalization levels, with a large proportion of the evaluated institutions complying with the Solvency II requirements. However, there is still a significant minority whose capital levels are below what would be required. In addition, should any of the stress scenarios proposed by EIOPA occur, the insurance market as a whole would be adversely affected and a higher proportion of entities would be below the required capital thresholds.
For this reason, EIOPA has issued a number of recommendations to national supervisors which aim to ensure a smooth transition to Solvency II compliance, which will be fully applicable from January 2016.
The document includes the main characteristics of the stress test, and the results published by EIOPA.
Capitalization levels are sound in most of the analyzed insurance companies. However, under stress many of them have a SCR ratio which is less than that required by Solvency II.
Download the technical note by clicking here (only in Spanish).