EIOPA unveiled the results of its stress tests

The European Insurance and Occupational Pensions Authority (EIOPA) has unveiled the results of stress tests carried out on insurers.

The tests aimed at identifying the insurance sector weaknesses on the basis of the new rules of Solvency II, were subdivided in two modules:

  • the core module, completed by 60 groups and 107 companies, focused on the core activities of companies, their non financial assests and their interactions with equity markets.
  • the "low yield" module, completed by 225 companies, monitored the impact of interest rates fluctuations.

The results reported by EIOPA unveiled that:

  • The insurance sector is sufficiently capitalised (in Solvency II terms)
  • 14% of companies have a Solvency Capital Requirement (SCR) ratio below 100%
  • The market is more sensitive to a "double hit" that combines decreases in assets value and lower free risk rate
  • In case the "low yield" environment was extended, 24% of insurers would not maintained their SCR and some of them might no longer be solvents over a period of 8 to 11 years.

Note that the stress tests were made weekly from 21st May to 9th July 2014.

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