Majority of European insurers pass solvency stress tests

5 July 2011

The majority of European insurance firms are “robust” enough to deal with exposure to credit, market and insurance-related risks, a new report has found.

A study by the European Insurance and Occupational Pensions Authority (EIOPA) showed that only ten percent - equivalent to 13 respondents in the report - did not meet the Solvency II Minimum Capital Requirements (MCR) to deal with an adverse economic scenario.

Up to eight percent of participants would fail to meet the MCR in an inflation scenario - which means the sector would face a solvency deficiency of €4.4 billion in an adverse climate and €2.5 billion deficit in the latter situation.

However, Gabriel Bernardino, EIOPA chairman, said: "This shows that overall the European insurance industry has a good shock absorber in its capital position.

“Now each company will have an analysis of the areas where they are more exposed, and they can take action.”

He added that it was not necessarily appropriate to name the insurers facing a capital shortfall as the shape of the regulation could change before implementation in 2013.

The stress testing exercise covered an estimated 60 percent of the total European insurance market.

By Jim Ottewill

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