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Insurance Sector More Vulnerable To A "double Hit" Stress Scenario: EIOPA

The European Insurance and Occupational Pensions Authority or EIOPA Sunday released results of its "stress test" which showed that the insurance sector is more vulnerable to a "double hit" stress scenario that combines decreases in asset values with a lower risk free rate.

The results revealed the insurance sector is in general sufficiently capitalized in Solvency II terms. Fourteen percent of companies, representing 3 percent of total assets, have a Solvency Capital Requirement or SCR ratio below 100 percent.

In a prolonged low yield scenario, 24 percent of insurers will not meet their SCR and some companies may face problems in meeting their promises in 8-11 years' time.

As a follow up to the stress test, the EIOPA issued a set of recommendations to NSAs to address the identified vulnerabilities in a coordinated way.

"NSAs are recommended to engage with companies to ensure that they have a clear understanding of their risk exposures and their vulnerability to given stress scenarios and that they have the capacity to take recovery actions if those vulnerabilities materialise," a statement from EIOPA said.

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