EIOPA LAUNCHES LATEST ROUND OF STRESS TESTS

The European insurance regulator launched the latest round of stress tests on Wednesday to measure insurers’ resilience to shocks and identify major vulnerabilities. The European Insurance and Occupational Pensions Authority (EIOPA) will spend the next few months testing insurers balance sheets to see how they hold up to a number of hypothetical scenarios, including financial and insurance-specific shocks. Insurers will be required to model adverse changes in asset values for sovereign and corporate bonds and equities, as well as shocks to real estate assets prices’ and interest rates. They will also consider catastrophe shocks, changes in mortality and longevity, as well as the impact on capital of insufficient reserves. EIOPA is also asking insurers to run a separate test to see how they perform in a prolonged low interest rate environment. The stress test will be carried out under the proposed Solvency II regime, which is due to be implemented from January 1, 2016. The results of the stress test analysis will be disclosed in November 2014. Gabriel Bernardino, Chairman of EIOPA, said that the results of the exercise will allow EIOPA and national regulators to define areas for further investigation and to focus supervisory responses.