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Property

Spanish construction rebuilds after market collapse

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Categorized | Insurance

Insurers face fresh round of stress tests


Posted on April 30, 2014

European regulators have signalled a fresh round of stress tests for insurance companies as concerns grow about how the sector is coping with persistently low interest rates.

The European Insurance and Occupational Pensions Authority is to probe how well insurers would deal with financial market shocks and unexpected rises in their liabilities.

    The exercise will hone in on insurers’ ability to handle weak returns from the fixed income instruments that dominate their investment portfolios. Life and pension groups, in particular, are under pressure because of the financial commitments they have made to policyholders.

    The stress tests will assess the impact on insurers of lower values of government bonds and corporate debt, as well as shocks to equities and property.

    They will also consider risks to insurers’ liabilities – such as changes to mortality and longevity for life assurers and losses from natural catastrophes for their non-life peers.

    “The design and the magnitude of the shocks will properly stress insurance companies’ financial position,” said Gabriel Bernardino, chairman of EIOPA.

    EIOPA’s disclosure comes just a day after its sister organisation, the European Banking Authority, unveiled the scenarios for its stress test of banks.

    Banks that failed previous tests were forced to strengthen their balance sheets.

    However, EIOPA has opted against taking a “pass-fail” approach to the insurance tests. The regulator is not expected to publish the names of any insurer when it discloses the results in November.

    The latest stress tests come three years after the previous round, which showed one in 10 insurers failed to cope with a series of damaging financial market and economic shocks.

    Nevertheless, EIOPA said at the time that the industry’s finances were robust and insurers maintain that they remain well capitalised and present lower risks to the wider financial system than banks.

    The tests are the latest regulatory scrutiny of insurers. Several big companies in the sector have been designated “too big to fail”. All European insurers need to comply with the forthcoming Solvency II regime.

    The stress tests will be based on the new capital requirements, which take effect at the start of 2016.