Clean bill of health for Irish insurers after stress tests
Published 05/07/2011 | 05:00
IRELAND's domestic insurers and firms trading out of the IFSC insurance hub got a clean bill of health in pan-European stress tests -- even though about 10pc of their peers failed. Ireland's success emerged hours after Frankfurt-based insurance supervisor Eiopa announced the results of Europe-wide tests on insurers' abilities to cope with adverse developments.
The tests found that threats, including falling equity prices, rising interest rates and higher levels of catastrophes, would push 10pc of European insurers below new capital standards.
Another 8pc would slip below the soon-to-be-introduced 'Solvency II' capital thresholds if they were faced with accelerating inflation and rapidly rising interest rates, Eiopa said.
The results aren't broken down by jurisdiction, but the Irish Independent understands that no insurer regulated in Ireland failed the tests.
The Central Bank confirmed that companies "accounting for more than 50pc" of the Irish life and non-life insurance markets took part in the tests.
Eiopa chief Gabriel Bernardino played down the significance of the 10pc failure rate, insisting the results showed the "insurance industry in Europe remains robust at an aggregate level".
The insurance stress tests were kicked off in March, and come as the industry grapples with the Solvency II regime.
Adverse market conditions include falling equity prices and interest rates, as well as a higher-than-expected number of natural catastrophes, the Frankfurt-based European Insurance and Occupational Pensions Authority said.
Eiopa started a stress test in March to see whether European insurers and reinsurers such as Allianz SE, Axa SA and Munich Re can meet capital requirements under Solvency II. The regulator adopted three stress scenarios that make increasingly severe assumptions about interest rates and falling equity markets and also took into account real-estate markets, credit and insurance risk.
"The insurance industry in Europe remains robust at an aggregate level," Mr Bernardino said.
The main vulnerabilities of the European insurers are adverse developments in yield curves and sovereign-bond markets and if there is a higher-than-expected rate of severe natural catastrophes, he said. "We do not expect a major stress from exposure to" Portugal, Ireland, Italy, Greece and Spain, he added.
Eiopa used the basic macroeconomic scenarios provided by the European Central Bank, which are also used by the banking sector, while adding "shock scenarios that are particularly relevant to insurers", Mr Bernardino said.
Eiopa, set up this year to oversee insurers and pension funds in Europe alongside local regulators, surveyed earnings of 221 insurers in 31 countries. The results reported are for 58 groups and 71 companies because of an aggregation of the results of companies within groups. (Additional reporting Bloomberg)