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LAUNCH OF A 2014 INSURANCE STRESS TEST

 

On 30 April 2014 EIOPA launched Europe-wide insurance stress test. Test consists of two modules, first one, core module, includes adverse market scenarios, second one, low yield module, is focused on the impact of a low yield environment.


As stated in the official press release, stress test exercise:

  • aims to test the overall resilience of the insurance sector and to identify its major vulnerabilities;
  • is focused on testing against interest rate, corporate bonds, sovereigns, equity and property stresses as well as against insurance specific shocks;
  • includes second module representing follow up to EIOPA’s Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment ;
  • will allow EIOPA and national regulators to define areas for further investigation and to focus supervisory responses.

 

All necessary information – background document, stress test specifications, reporting templates and national contact point for Q&A process – can be found on EIOPA's official website.

Alongside with standard specifications dedicated to description of stress test framework and stress scenarios, EIOPA published updated Solvency II Technical Specifications. These specifications, as usual, are divided into two parts, first one focusing on assets and liabilities valuation, SCR and MCR standard formula calculation, own funds determination and group specifics; second one focusing on determination of the risk free interest rate term structure – methods for deriving, volatility and matching adjustment, and transitional measures.

Be aware that technical specifications are released for the current preparatory phase only, especially to support stress test exercise. At the beginning of each of those documents EIOPA acknowledges that these specifications have been drafted to reflect the content of the Solvency II Framework Directive and amendments agreed to it by the Omnibus II Directive, the content of the current version of Delegated Acts and working document of the EIOPA Guidelines. However, due to the simplifications and various assumptions introduced via these technical specifications for the purpose of the preparatory phase only, documents should not be seen as a complete implementation of the Solvency II regulatory framework.

     

 

   
 
   
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