EIOPA announces results of the EU-wide insurance stress test 2014

The European Insurance and Occupational Pensions Authority (EIOPA)
announced today the results of its EU-wide Insurance Stress Test. The
exercise aimed to test the overall resilience of the insurance sector and
to identify its major vulnerabilities.
Undertakings estimated a baseline scenario using the upcoming Solvency II
regime, without internal models, and on top of that tested a number of
severe macro-economic and insurance specific shocks, including a prolonged
period of low yields ("Japanese-like" scenario) and a sudden reverse
in interest rates ("Inverse" scenario).
The results of the baseline scenario indicated that the sector is in
general sufficiently capitalised in Solvency II terms. Nevertheless, 14%
of the companies representing 3% of total assets, had an SCR ratio below
100%.
The stress test results showed that the insurance sector is more vulnerable
to a "double hit" stress scenario that combines decreases in asset
values with a lower risk free rate. However, 56% of the companies would
have a sufficient level of capital under the most severe "double hit"
stress scenario. The major vulnerabilities as per the insurance specific
stresses were mass lapse, longevity and natural catastrophes.
According to the low yield module of the stress test, 24% of companies
would not meet their SCR under the "Japanese‑like" scenario, while
20% would not meet this threshold under the "Inverse" scenario. A
continuation of the current low yield conditions could see some insurers
having problems in fulfilling their promises to policyholders in 8-11
years' time.
As a follow up to the stress test EIOPA issued a set of Recommendations to
NSAs in order to address in a coordinated way the identified
vulnerabilities.
In the context of the preparation for Solvency II, NSAs are recommended to
engage in a rigorous assessment of the preparedness of insurance
undertakings, in particular regarding the situations where capital
increases and/or balance sheet management actions will be needed.
Regarding the main vulnerabilities identified in the stress test, NSAs are
recommended to engage with companies to ensure that they have a clear
understanding of their risk exposures and their vulnerability to given
stress scenarios and that they have the capacity to take recovery actions
if those vulnerabilities materialise.
Based on the results of the Low Yield module, in particular for
undertakings that operate considerable duration and/or internal rate of
return mismatches, NSAs are recommended to examine their asset/liabilities
management and risk management strategies and practices and ensure that
they properly assess the sustainability of the guaranteed rates offered.
Gabriel Bernardino, Chairman of EIOPA, said: "EIOPA's stress test 2014
was a truly preventive supervisory tool. It gave EU supervisors an updated
picture of the undertakings preparedness to comply with the upcoming
Solvency II capital requirements and by applying a set of rigorous and
severe stresses indicated to us the areas where undertakings are most
vulnerable. EIOPA's recommendations will ensure that the vulnerabilities
identified are addressed and that follow-up actions by NSAs will be taken
in a consistent way".
The documentation can be viewed on EIOPA's website (Link:
https://eiopa.europa.eu/activities/financial-stability/insurance-stress-test-2014/index.html
).


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The European Insurance and Occupational Pensions Authority (EIOPA) has published a Consultation paper on powers for bann

The European Commission asked EIOPA for its advice on completing new rules
on the intervention powers of national supervisors and EIOPA. This is
about powers and procedures for temporarily prohibiting or restricting the
marketing, distribution and sale of specific insurance-based investment
products. Bans should happen only if serious concerns exist regarding
investor protection, orderly functioning and integrity of financial
markets, or the stability of the whole or part of the financial system.

Consulting all stakeholders on this matter is the next step in preparing
the Commission. The consultation ends 27 February 2015.

Click here (Link:
https://eiopa.europa.eu/consultations/consultation-papers/index.html )to
read the Consultation paper


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Phone: +49 69 951119-20
Fax: +49 69 951119-19

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https://eiopa.europa.eu

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password on the login page of the EIOPA Restricted Area.

Invitation for members of a Consultative Expert Group on KIDs for PRIIPS

The Joint Committee of the three European Supervisory Authorities (EBA,
EIOPA and ESMA) today launches a process for the selection of members of a
Consultative Expert Group (CEG). The CEG will be advising the Joint
Committee's Sub-group on Key Information Documents for Packaged Retail
and Insurance-based Investment Products (PRIIPs) and will be expected to
provide technical input to the PRIIPs Sub-Group in relation to its tasks,
at the request of the Sub-Group at all stages of the policy formulation
process.

Related Documents
Call for interest (Link:
https://eiopa.europa.eu/fileadmin/tx_dam/files/consultations/consultationpapers/JC_DP_2014_02_-_PRIIPS_Discussion_Paper/Call_for_interest_Expert_Group_PRIIPs.pdf
)


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Phone: +49 69 951119-20
Fax: +49 69 951119-19

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https://eiopa.europa.eu

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Speech by Gabriel Bernardino, Chairman of EIOPA, at the 9th European Pension Funds Congress in Frankfurt am Main

Gabriel Bernardino, Chairman of EIOPA, in his speech at the 9th European
Pension Funds Congress in Frankfurt am Main (Link:
https://eiopa.europa.eu/fileadmin/tx_dam/files/Press-Room/speeches/2014-11-18_European_Pension_Funds_Congress.pdf
): " To ensure that citizens will have a chance to maintain appropriate
standards of living in their retirement it is self-evident that we need a
comprehensive package of reforms."




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The Joint Committee of the three European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) published today a Discuss

The Joint Committee of the three European Supervisory Authorities (EBA,
ESMA and EIOPA - ESAs) published today a Discussion Paper on Key
Information Documents (KIDs) designed to help retail investors in the EU
better understand and compare packaged retail and insurance-based
investment products (PRIIPs) across the EU.


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EIOPA consults on the calculation process for the Solvency II relevant risk free interest rate

The European Insurance and Occupational Pensions Authority (EIOPA) invites
external stakeholders to provide their feedback on the Technical Document
on the Relevant Risk Free Rate Term Structures. The Technical Document
describes the methodology, assumptions and identification of the data for
the calculation of the relevant risk free interest rate term structures,
which in turn are used for the calculation of technical provisions.

The Technical Document intends to ensure full transparency of the
calculation process. EIOPA has published it at the earliest possible stage
in order to provide a key input for the risk management and assessment of
the financial and solvency position of (re)insurance undertakings under
the impending Solvency II regime.

Many parameters of the risk free rates are already determined by EU
legislation. However, some alternatives remain and by the current paper
EIOPA would like to collect the views of stakeholders on the proposals it
suggests.

EIOPA believes that its proposals will be beneficial for policyholders as
they enhance the level playing field of the EU single insurance market,
thus, facilitating the valuation of undertakings and the work of
supervisors.

The consultation will end at 12.00 hrs CET on 21 November 2014.

Comments should be submitted using the dedicated Template for Comments via
email to Consultation_TD_RFR(at)eiopa.europa.eu (Link:
Consultation_TD_RFR@eiopa.europa.eu ). Please note that comments submitted
after the deadline or not submitted on the provided template cannot be
processed.

The consultation paper, the additional illustrative materials and the
Template for Comments can be viewed here (Link:
https://eiopa.europa.eu/consultations/consultation-papers/index.html ).




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Phone: +49 69 951119-20
Fax: +49 69 951119-19

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https://eiopa.europa.eu

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