Stress tests - FMA Österreich
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Stress tests

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According to Article 267 of the Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) the main objective of insurance supervision is the protection of policyholders’ and beneficiaries’ interests. To achieve this objective, the 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 or significantly increased costs. On the basis of such scenarios defined by the FMA or the 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.

The FMA regularly conducts stress tests to analyse the risks and vulnerabilities in the insurance sector especially with regard to the current economic climate as well as for assessing the risk capacity of the individual insurance undertakings. In this case the effects of a low interest environment that prevails for a long period of time, a sharp increase in interest rates (combined with a broadening of the credit spread) as well as the effects of variously market events are tested and variously liability-side shocks simulated.
In addition EIOPA conducts a Europe-wide insurance stress text, which also includes Austrian insurance undertakings. The stress tests are conducted in close cooperation with the national supervisory authorities. Information about the stress tests conducted by EIOPA together with the national supervisory authorities can be found by following this link: Insurance stress test | Eiopa (europa.eu) The FMA advises that the results of the stress test are to be understood against the background of the selected assumptions. A comparison of the results of individual countries is only possible to a limited extent in light of respective country-specific circumstances.