2024 Insurance Stress Test

The European Insurance and Occupational Pensions Authority (EIOPA) has published the results of its 2024 stress test for insurers. The test assessed the impact of such a scenario on the capital and liquidity position of European insurance companies. The results show a resilient sector, but highlight significant vulnerabilities with implications for both the solvency and liquidity of the system.


2024 Insurance Stress Test

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Executive summary

EIOPA has published the results of its 2024 stress test for insurers, focusing on the economic consequences of a re-intensification or prolongation of geopolitical tensions. This test has assessed the impact of such a scenario on the capital and liquidity position of European insurance companies. The results show a resilient sector but highlight significant vulnerabilities with an impact on both the solvency and liquidity of the system.

The primary objective of the stress test was a micro-prudential assessment, focusing on the resilience of individual insurance companies to severe adverse scenarios, especially the re-intensification of geopolitical tensions. Secondary objectives included the identification of sectoral vulnerabilities within the European insurance industry. Through this assessment, EIOPA aimed to provide recommendations to improve the overall resilience of the insurance sector, at both the European and the national level.

Key aspects of the exercise

  • Methodological approach. The stress test exercise assessed the resilience of the European insurance sector from two perspectives: i) a capital assessment, which was 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 were asked to estimate their position under two scenarios: i) static balance sheet (fixed balance sheet), where only integrated management actions were allowed; and ii) dynamic balance sheet (constrained balance sheet), incorporating Management Actions, where a set of identified reactive management actions are allowed.
  • Scenario. The hypothetical scenario of the exercise depicted a scenario of sluggish economic growth, coupled with inflationary pressures, stemming from geopolitical tensions and their cascading effects on global markets. The scenario also predicted domino effects, such as changes in interest rate expectations and shifts in financing conditions, which further added to the complexity of the adverse economic outlook.
  • Reporting templates. Participants used spreadsheet templates to report on capital and liquidity by completing built-in qualitative questionnaires. These reports included qualitative explanations for the indicators. The exercise was conducted under three different scenarios, with each group entity submitting a capital template (with consolidated data) and a liquidity template per relevant individual entity for the liquidity assessment.
  • Results. The exercise showed that EEA insurers are generally well capitalized and able to meet Solvency II requirements even in the face of severe but plausible stress test shocks stemming from widespread supply chain disruptions, low growth and renewed inflationary pressures due to heightened geopolitical tensions. However, vulnerabilities were identified with a significant impact on the sector's solvency and liquidity: the aggregate solvency ratio declined by 98.5 percentage points, and liquidity positions showed a shortfall of EUR 40.9 billion, which was improved by the reactive management measures simulated by the participating institutions. Companies mostly opted for investment strategies, dividend retention and internal capital raising that improved the solvency position. To restore liquidity, they used measures such as asset sales and credit lines.

This technical note summarizes the methodology and results of the 2024 stress test conducted by EIOPA.

Download the technical note on the 2024 Insurance Stress Test.