Impact of EU-wide Insurance Stress Tests on Equity Prices and Systemic Risk

Petr Jakubík and Saida Teleu ()
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Saida Teleu: Maltese Financial Services Authority, Malta

No 2021/25, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Since the global financial crisis in 2007, stress tests have become standard tools for regulators and supervisors to assess the risks and vulnerabilities of financial sectors. To this end, the Insurance and Occupational Pensions Authority (EIOPA) regularly performs EU-wide insurance stress tests. This paper analyses the impact of the conducted exercises in 2014, 2016 and 2018 on the equity prices of insurance companies. Using an event study framework, we find a statistically significant impact only for the publication of the 2018 exercise results. Our empirical analysis further suggests that the final version of technical specifications for the 2014 exercise, the initiation of public consultation, and the published stress test scenario of the 2018 exercise contributed to the decline in systemic risk. To our best knowledge, this is the first paper that investigates this topic for the European insurance sector. Our empirical results could help improve the communication and design of future stress test exercises.

Keywords: European insurance sector; EU-wide insurance stress test, systemic risk, event study, equity prices (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G23 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2021-07, Revised 2021-07
New Economics Papers: this item is included in nep-eec, nep-fmk, nep-ias and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2021_25

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