The European Insurance and Occupational Pensions Authority (EIOPA) today announced it is preparing to launch the second Europe-wide stress test for the insurance sector. The test will be conducted in cooperation with the European Systemic Risk Board (ESRB) and the respective national supervisory authorities including the Swiss FINMA and is expected to be launched at the beginning of the second quarter of 2011.
The goal of the stress test is to identify and quantify the impact of the different stress scenarios on an insurer’s financial position in an adverse and very severe economic environment. Insurance companies play an important role in the social and economic cycle. Managing financial resources and providing a sound financial foundation is vital for policyholders to manage their own personal risk. The stress test is one of a range of supervisory tools for assessing the strength of individual institutions and to evaluate if the current structure supports the stability of financial markets. It helps EIOPA to understand capital positions of insurers and insurance groups in adverse situations.
To conduct the stress test, EIOPA is seeking the cooperation of the European insurance industry. The test is targeted towards the European insurance sector and will include a minimum of 50% of insurance companies per country measured by gross premium income. Currently, EIOPA is preparing a stress test proposal including the scope of the exercise, framework and economic scenarios under which the financial positions will be tested. Before finalising the framework of the stress test, EIOPA will consult national supervisors and insurance associations.
The initiative is based on a request of the EU Economic and Financial Committee (EFC) and is being coordinated with the stress test being undertaken by the European Banking Authority (EBA) within the European System of Financial Supervisors (ESFS).
Source : EIOPA Press Release
