Nearly 10 per cent of European insurers would need to raise fresh capital in the event of a severe economic shock accompanied by a plunge in share prices, tumbling interest rates, and a property market crash, the new European insurance regulator Eiopa said yesterday.
In that scenario, 13 insurers would rack up a collective €4.4bn (£4bn) shortfall relative to the minimum capital level required under the EU's proposed Solvency II capital rules, the watchdog said, as it revealed results of a stress test aimed at gauging the sector's financial resilience. The Solvency II rules, however, could change before they are implemented in 2013.
Eiopa – the European Insurance and Occupational Pensions Authority – did not name the companies but said that the small size of the estimated capital shortfall compared with the sector's €425bn surplus demonstrated that the industry is financially robust overall.
"This shows that overall the European insurance industry has a good shock absorber in its capital position," said Eiopa's chairman, Gabriel Bernardino. "Now each company will have an analysis of the areas where they are more exposed, and they can take action."
Insurers emerged from the financial crisis in better shape than banks, but a small number of hig-profile failures and government bailouts in the sector has spurred regulators to scrutinise the industry more closely.
Eiopa's banking counterpart, the European Banking Authority, is expected to publish the results of a stress test of European lenders later this month.