Stress Test Results Confirm Strength of European Insurance Industry

The second stress test of European insurers, conducted by the European Insurance and Occupational Pensions Authority (EIOPA), has confirmed “the robustness of the European insurance market and its ability to withstand severe stress scenarios,” notes the European (re)insurance federation (CEA).

The tests show that, on aggregate, Europe’s insurers have a substantial solvency surplus of €425 billion [$615 billion], “which remained high even when the adverse scenario and the inflation scenario in the stress tests were applied – €275 billion [$398 billion] and €367 billion [$531 billion] respectively.”

CEA Director General Michaela Koller commented: “It should also be borne in mind that the stress tests were based on an interim model (the fifth quantitative impact assessment, QIS 5) of the future Solvency II regulatory regime. There were a number of flaws in that QIS 5 model that the European Commission has since addressed, including the more balanced calibration of certain requirements.

“The CEA has been and continues to submit technical feedback to EIOPA and the European Commission to finalize the details of the Solvency II regime,” Koller continued.

The CEA also pointed out that, “even under the interim model used in these stress tests, only 13 of the participating groups and companies did not meet the minimum capital requirement (MCR) in the stress scenarios.

“It should be remembered that in insurance the MCR consists of technical provisions plus an additional risk margin. The technical provisions alone are sufficient to ensure that all policyholder claims can be covered in full.”

Source: European (re)insurance federation – CEA