Huw Jones

LONDON, (Reuters) – Some insurers within the European Union were forced to rely temporarily on relief measures in order to prevent their solvency from falling below the regulatory minimum during this year’s stress test. The bloc’s insurance watchdog stated on Thursday.

Market shocks were used by the European Insurance and Occupational Pensions Authority to assess resilience to long term fallouts from COVID-19 and low rates of interest for a prolonged period.

Contrary to the banks’ stress test, individual results are not made public unless they consent. But this could change.

Only 8 out of the 44 tested insurers agreed to publish their results, which is not a big international company.

Petra Hielkema (EIOPA Chair) stated to reporters that “we have concerns about the industry’s approach to transparency.”

After three years of negotiations with the sector, no progress has been made in publishing company results voluntary. EIOPA now plans to ask lawmakers to require disclosures as a legal requirement.

This test included 44 insurance companies from 20 countries that represented 75% of Europe’s entire market for European Economic Area.

EIOPA reported that nine companies’ solvency ratios fell short of what is required by law.

To bring back their minimum solvency ratio, some firms were forced to take advantage of the relief that was available up until 2032 in relation to Solvency II’s phasing out of EU insurance capital rules.

EIOPA stated that none of the reported assets over liabilities ratios fell below the minimum. This would have affected their ability to pay policyholder claims.

EIOPA reported that “the European insurance sector, with the exceptions of a small number of cases proves to have been able to handle such a severe evolution of the markets through application of reactive management actions.”

“However the capital component shows that part of the market relies still on transitional arrangements that will be phased-out by 2032.”

EIOPA recommended that insurance firms take concrete steps to lessen their dependence on short-term measures. They also stated that there will be talks between insurers and regulators in an effort to fix vulnerabilities found by the test.

EIOPA will assess whether it is necessary to issue recommendations regarding the relevant issues identified during the exercise.

Insurance Europe, an industry association, stated that these results support the sector’s ability to fulfill customers’ demands under severe 1 in 1,000-year events.

BaFin, the German financial regulator said that German insurance companies had enough funds to meet liquidity needs.

Insurance companies won’t have to face their next testing until 2023. This could mean that they will need to consider climate-related factors.