Commenting on The European Insurance and Occupational Pensions Authority’s (EIOPA) launch of the second Europe-wide stress tests for the insurance sector, Philippe Guijarro, partner at PwC, said: "These new insurance stress tests are less severe than the previous European exercise but bring the added complexity of being based on Solvency II, which has still to be finalised.
"Requiring European insurers to conduct stress tests so soon after completing their QIS5 submissions and producing their year-end accounts will put a huge strain on the industry’s already stretched resources. The industry is likely to be concerned about the tight timeframe within which EIOPA wants to receive the results. This adds further to the industry's compliance burden as it gears up for Solvency II.
"Despite the success of QIS5 a number of significant issues remain unresolved and caution will need to be exercised over the reliability of the results of such a stress testing exercise. The exercise proposes the relaxation of the requirement to hold capital for intra-group arrangements, which had a significant impact for the UK industry under QIS5.
"It is encouraging that EIOPA is prepared to accept a pragmatic approach from insurers to some of the more complex areas of a Solvency II based valuation, recognising the size of the task for European insurers."
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