Foremost findings
Whereas EIOPA stress assessments stay a non go/fail train, it had an purpose to look at individuals below shock. EIOPA concluded that insurers have enough Solvency II buffers which allowed them to soak up the shock of an antagonistic situation. Underneath the mounted stability sheet method the Solvency II ratio decreased by on common 92 share factors (from 218% to 126%) and by solely 79ppt below a constrained stability sheet the place sure reactive measure actions had been already utilized. Many of the ratio lower was triggered by the drop in personal funds (and the deteriorating high quality of these funds), nevertheless a slight improve within the solvency capital requirement additionally performed a job. Solely 9 individuals breached the 100% Solvency II ratio requirement below mounted stability sheet, whereas 7 of them managed to regain compliance with the capital requirement below a constrained stability sheet.
Lengthy-term ensures and transitional measures had been flagged as nonetheless being essential shock absorbers. To offer an thought of the significance of those measures, with out them the lower in Solvency II ratio below shock would quantity to not 92, however to 126 share factors (mounted stability sheet). It’s essential to remember the fact that whereas LTGs is a everlasting construction below Solvency II, transitional measures shall be phased out by 2032, however their impression typically is way much less important than that of LTGs.
Underneath a double hit situation, belongings over liabilities protection additionally reveals a cloth lower, dropping from 110% to 106% (below each mounted and constrained stability sheet). The ratio not falling under 100% provides EIOPA confidence that “the sector, even below a extreme situation, proves to have the ability to meet its guarantees to the policyholders”. The drop in belongings was partially offset by a decline in liabilities. EIOPA acknowledged that one of many key vulnerabilities of the insurance coverage phase is publicity to market shocks. Within the stress situation authorities mounted earnings belongings had been lowered by 2.8%, corporates by 4% and equities by 43%. The change in derivatives place was constructive, partially offsetting the shock and highlighting an lively use of derivatives by insurance coverage firms to be able to navigate antagonistic market atmosphere. On the liabilities facet life provisions noticed a marginal lower, whereas non-life provisions elevated.
As insurers had been allowed to use reactive administration actions for calculation post-stress positions below constrained stability sheet, it gave EIOPA a chance for a macroprudential train observing which measures had been used and what impact they’d. Solely measures which had been already a part of the insurers’ governance frameworks had been allowed. Amongst such measures had been selections to not distribute dividends, de-risking of belongings and liabilities, issuance of subordinated debt and fairness, discount of prices, reinsurance, use of VA, and many others. EIOPA acknowledged that not all the actions resulted in fascinating outcomes, and likewise not all actions had been in one of the best long-term pursuits of the businesses.
When it comes to liquidity place, no important shortfalls had been recognized in antagonistic eventualities. A scarcity within the web liquidity place of €10bn below a hard and fast stability sheet rapidly turned constructive by way of administration actions below a constrained stability sheet. Given the sturdy liquid asset place there’s at all times a considerable buffer to cowl any scarcity that was recognized below mounted stability sheet.
The outcomes had been launched on an mixture foundation. A handful of insurance coverage firms within the EIOPA pattern agreed to share info on their particular person outcomes. No Dutch names nevertheless had been amongst them.
