EIOPA's Consults On Its Stress Testing Methodology – A Game Changer For The (Re-)Insurance Sector?

On July 22, 2019, the European Insurance and Occupational Pensions Authority (EIOPA) published a discussion paper on methodological principles of insurance stress testing (the Discussion Paper)¹, which sets out proposed principles and guidelines for its next EU-wide stress test. Relevant stakeholders are invited to provide feedback by October 18, 2019. The Discussion Paper, which applies to reinsurers and insurers, was published against the backdrop of criticism of EIOPA's previous techniques and its own admission that its testing methodologies are overly complex and disjointed, and that there is a need for a more consolidated approach. This Client Alert, as part of our Insurance Insight series, looks at this new proposed methodology and how affected parties may want to take preparatory action given recent discussion amongst policymakers and market participants on stress testing as an appropriate supervisory tool.