EIOPA unveils 2021 stress test based on prolonged pandemic scenario

The European Insurance and Occupational Pensions Authority (EIOPA) has launched its 2021 insurance stress test for the European insurance market.

The stress test is intended to assess the resilience of the European insurance market in case of “severe but plausible” adverse financial and economic conditions, and identify the market’s vulnerabilities, evaluating both the impact on capital and liquidity.

The 2021 stress test envisages a prolonged COVID-19 scenario in a “lower for longer” interest rate environment, a scenario that was developed in cooperation with the European Systemic Risk Board (ESRB).

The 2021 exercise includes 44 European re/insurance companies, selected based on size, EU wide market coverage, business lines conducted, number of represented jurisdictions and local market coverage. It includes both life and non-life businesses, covering 75 percent of the European Economic Area based on total assets in Solvency II.

EIOPA is carrying out a question and answers process to clarify any questions market participants have about the process. The results are expected to be published in December 2021.

Peter Braumüller, EIOPA’s vice chair, said: “This stress test is of particular importance because it assesses the resilience of the solvency and liquidity positions of the European insurers against an adverse scenario that could materialise in the aftermath of an economic crisis and in a period of high uncertainty. The scenario reflects severe but plausible shocks and will bring results that will shed light on the resilience of the European insurance sector. However, the exercise should not be considered a pass-or-fail exercise”.

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