The insurance sector at a milestone: positive initial experiences with the newly introduced Solvency II system

Zsuzsanna Bora (), Norbert Holczinger (), Koppány Nagy () and Gabriella Merész ()
Additional contact information
Zsuzsanna Bora: Magyar Nemzeti Bank
Norbert Holczinger: Magyar Nemzeti Bank
Koppány Nagy: Magyar Nemzeti Bank
Gabriella Merész: Magyar Nemzeti Bank

Financial and Economic Review, 2016, vol. 15, issue 4, 88–114

Abstract: Indisputably, the most important event of the year on the European insurance market was the transition to the so-called Solvency II (S2) regime, which laid down the new riskbased own funds requirement. In our study, we assess the first Hungarian results based on the “Day 1” S2 submissions, the MNB’s first S2-based risk assessment and the EIOPA1 stress test examining the impact of the persistently low yield environment on capital adequacy. The first experiences of the new regime are positive. The sector-level 204 per cent capital adequacy is reassuring overall. Within this, the capitalisation of 20 out of the 28 insurers is above the 150 per cent stipulated in the MNB’s recommendation on the volatility capital buffer. In 2016, the MNB introduced a new risk assessment approach based on S2 and business models, and according to that, the overall risk level of the sector is moderate, but the challenges include the low yield environment from the perspective of profitability, the level of digitalisation among operational risks as well as the adjustment to the MTPL and the life insurance market situation with regard to insurance risks. The moderate risk rating with respect to capital risk is borne out by the results of the EIOPA stress test: the persistently low yield environment has no substantial impact on capital adequacy at the sector level, however, when it is coupled with a market shock, some market participants may experience difficulties.

Keywords: Solvency II; stress test; capital adequacy; own funds; capital requirement; risk assessment (search for similar items in EconPapers)
JEL-codes: G22 G29 G32 (search for similar items in EconPapers)
Date: 2016
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://english.hitelintezetiszemle.hu/letoltes/zsu ... gabriella-meresz.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:15:y:2016:i:4:p:88-114

Access Statistics for this article

More articles in Financial and Economic Review from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Morvay Endre ( this e-mail address is bad, please contact ).