The European Insurance and Occupational Pensions Authority (EIOPA) issued a statement addressing the business and solvency position of the European insurance market. No ground-breaking measures, nevertheless, we summarised some interesting items:
Please contact Lennard Beijering or Nicolas Ziob for more information about potential consequences of the virus in the insurance sector.
In March 2020, IASB discussed the amendments regarding the effective date of the accounting standard IFRS 17. It was tentatively decided to defer the implementation by two years to 1 January 2023. Furthermore, it was also agreed that insurers start to report under IFRS 9 at the same effective date.
The methodological paper published at the beginning of March covers, amongst others, the process, scope, scenario design and shock calibration of insurance stress testing. Scenarios are based on a narrative and determine the goal of the exercise. It is concluded that scenarios should be backward and forward looking. Additionally, an approach consistent with solvency II is achieved by stressing the ultimate forward rate after the term structure is shifted. Shocks are generated for all typical products on an insurer’s balance sheet. The scenarios are then constructed by analysing the joint event distribution following a single or multiple financial variable shock.
EIOPA also increases their focus on the low-interest environment, as indicated in their supervisory statement. Preliminary observations of an extensive analysis in Q2 2019 are:
Aligned with EIOPA, the Dutch Central Bank (DNB) published their supervisory outlook also focusing on the impact of low interest rates for insurance companies. Additionally, they expect a continuing enter of private equity in the industry. This will also drive the change to more digitalisation, technical innovation and sustainability. DNB wants to monitor the resulting risk from these changes, such as being hacked and the use of artificial intelligence.
Please contact Martijn de Groot or Lennard Beijering for more information about insurance regulation, stress testing or coping with the low-interest rate environment.
The Board of the International Organization of Securities Commissions (IOSCO) has published the annual work program for 2020, which identifies the following priorities for this year:
In addition, IOSCO will keep focusing on systemic risk in capital markets.
Please contact Martijn de Groot or Bas van Oers for more information about advancements and arising risks within the capital markets.
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