EUROPE - At least 10% of European insurers would fail to meet Solvency II minimum capital requirements, according to the European Insurance and Occupational Pensions Authority (EIOPA).
EIOPA said the results of its second European insurance stress test showed that the insurance market remained strong, but it warned that some insurers were unlikely to meet the minimum requirements for Solvency II.
It tested 221 insurers' ability to meet those requirements under three scenarios - 'stress', 'adverse' and 'inflation'.
Under the adverse scenario, as much as 10% of the participating insurance groups and companies would fall short of the requirements, while 8% would fail in the inflation scenario.
The results also showed a sharp decrease in solvency surplus.
Based on data as at 31 December 2010, insurers participating in the stress test showed an aggregate solvency surplus of €425bn before the stress test scenarios were applied.
This total fell to €275bn when the adverse scenario was applied and to €367bn in the inflation scenario.
The insurance groups and companies that did not meet the capital requirements showed a solvency deficit of €4.4bn in the adverse scenario and €2.5bn in the inflation scenario.
According to EIOPA, the results were due chiefly to developments in equity prices, interest rates and sovereign debt markets.
The authority also conducted a separate study on sovereign bond exposure.
The results show that as much as 5% of insurance companies would fail to meet the minimum capital requirements under this scenario, with an aggregate surplus plunging from €425bn to €392bn.