Stress Tests – Insurance
FMA Priorities for Supervision regarding Stress Tests – Insurance
Article 267 of the Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) stipulates that the main objective of insurance supervision is the protection of policyholders’ and beneficiaries’ interests. To achieve this objective, the Austrian Financial Market Authority (FMA) may, in accordance with Article 273 VAG 2016, develop quantitative tools to assess whether insurance and reinsurance undertakings are able their obligations even in difficult economic situations. Stress tests, which are conducted by the FMA on a regular basis constitute one such instrument for undertakings. In a stress test insurance and reinsurance undertakings are required to simulate their business performance in particularly unfavourable scenarios. Such scenarios may include sharp declines in the capital markets, (natural) catastrophes, cyber-attacks, liquidity shortages or significantly increased costs. Based on scenarios defined by the FMA and/or the European Insurance and Occupational Pensions Authority (EIOPA), the FMA may estimate to what extent insurance and reinsurance undertakings are able to permanently fulfil their obligations, even in adverse situations. Where applicable the supervisor may require individual undertakings to take measures to increase their resilience.
