Do insurance stress tests matter? Evidence from the EU-wide insurance stress tests

Petr Jakubík and Saida Teleu ()
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Saida Teleu: Charles University in Prague

Risk Management, 2024, vol. 26, issue 3, No 5, 27 pages

Abstract: Abstract This study examines market reactions to EU-wide insurance stress tests, providing the first analysis of this nature for the insurance sector. Empirical results reveal that earlier tests in 2014 had a limited market impact, while the 2018 stress test garnered slightly stronger but still limited responses. Market reactions in insurance differ from banking stress tests, potentially due to factors such as non-disclosure of individual results and superior capitalization in the insurance sector. The study highlights the potential of EU-wide insurance stress tests to reduce systemic risk, particularly when governance includes stakeholder interaction. The findings emphasize the ongoing need for research on stress test impact, proposing a balance between efficiency and transparency in future designs. The study concludes by advocating for long-term analyses to ensure the robustness of results and exploring evolving trends in EU-wide insurance stress tests.

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)
Date: 2024
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DOI: 10.1057/s41283-024-00147-3

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