The European Insurance and Occupational Pensions Authority (EIOPA) has launched its Insurance Stress Test 2024. The sample selected for this stress test includes 48 undertakings from 20 member states, representing over 75% of the European Economic Area (EEA) insurance market.
2024 Insurance Stress Test
Executive summary
EIOPA has launched its 2024 stress test for insurers, focusing on the economic consequences of a re-intensification or prolongation of geopolitical tensions. This test assesses the impact of such a scenario on the capital and liquidity position of European insurance companies.
The primary aim of the stress test is to produce a micro-prudential assessment, focusing on the resilience of individual insurance companies to severe adverse scenarios, particularly the re-intensification of geopolitical tensions. Secondary objectives include the identification of sectoral vulnerabilities within the European insurance industry. Through this assessment, EIOPA aims to provide recommendations to improve the overall resilience of the insurance sector at both European and national level.
Main content
- The scenario envisages a resurgence of geopolitical tensions leading to widespread supply chain disruptions, slow growth and inflationary pressures, affecting various asset classes and financing conditions.
- The scenario paints a picture of slow economic growth, coupled with inflationary pressures, stemming from geopolitical tensions and their cascading effects on global markets. The scenario also predicts domino effects, such as changes in interest rate expectations and shifts in financing conditions, which further add to the complexity of the adverse economic outlook.
- In terms of the methodological approach, the stress testing exercise assesses the resilience of the European insurance sector from two perspectives: i) a capital assessment, which is based on the Solvency II framework; and ii) a liquidity assessment, based on estimates of the sustainability of companies' liquidity positions. In addition, insurance companies participating in the stress test are asked to estimate their position under two assumptions: i) static balance sheet (fixed balance sheet), where only integrated management actions are allowed; and ii) dynamic balance sheet (constrained balance sheet), which includes a set of allowed reactive management actions.
Download the technical note on the 2024 Insurance Stress Test.