The European Insurance and Occupational Pensions Authority (EIOPA) published the Final Report for the 2014 EU-wide Insurance Stress Test on 30th November 2014.
The stress test assessed the resilience of the European insurance market under extremely adverse market developments, in particular to a prolonged period of low interest rates. Results show that the majority of European insurers would satisfy the Solvency Capital Requirements (SCR) under the Solvency II framework, both before and after stress. It emerged that 14% of undertakings do not meet the SCR requirements of Solvency II in the pre-stress scenario, increasing to 24% in a prolonged low-yield scenario. The names of individual companies that fell short in EIOPA’s stress tests were not released.
Eight Maltese insurance undertakings, both life and non-life, participated in the exercise. Results show that the average SCR ratio of the Maltese participants is above the minimum 100% requirement both before and after stress.
EIOPA made recommendations to National Supervisory Authorities, including the MFSA, in order to address the vulnerabilities that were identified such as correction of mismatches in assets and liabilities, review of product mixes and risk management and encouraging changes to business models.
For more information contact Tanya Causon, Regulatory Manager (Insurance), GANADO Advocate.