Insurers for climate change stress testing; see less merit in EU-wide liquidity stress tests

Written by Adam Cadle

15/10/2020

Insurance Europe believes that an appropriately designed climate change stress test could provide information to help assess industry exposures, but said liquidity risk is already well managed due to existing regulatory provisions.

In its response to a discussion paper published by EIOPA, Insurance Europe said initial climate stress tests should be “explorative”, and liquidity risk stress testing is well managed due to “insurers’ integrated approach to liquidity and risk management, which already includes stress testing and which is widely reported upon within the ORSA”.

On multi-period stress testing, Insurace Europe stated it takes the view that these tests are “too complicated and costly to be taken forward”.

The European insurance industry reiterated its views that any stress test exercise should have clear objectives, appropriate timescales and be communicated appropriately. In particular, the results of any stress test should only be published at aggregate level.

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