The European insurance industry is in a state of flux, according to a new study from the European Insurance and Occupational Pensions Authority (EIOPA). The organizations recently conducted a stress test of nearly 130 as yet unidentified insurers. The test showed that the insurance market is quite robust, which means that most insurers are able to procure new clients and produce significant revenue. However, the thirteen unnamed insurance companies failed the test. Based upon its findings, the EIOPA estimates that these insurers would not be able to handle the impact of another global crisis.
Last year, the organization posed the same study of the insurance industry and found much more favorable results. The test is designed to examine how insurance companies would cope with varying degrees of economic crisis. In the number of scenarios presented last year, most companies were able to reduce their surplus capital by €58 billion (more than $80 million) before being put at significant financial risk.
The shortcomings of the thirteen insurance companies may be due to the severity and frequency of catastrophe’s occurring so far this year. Such disasters have had both an impact on the worldwide insurance industry and global economy. Many insurers, along with their associated reinsurance companies, have been forced to raise premiums to offset their massive losses.
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Despite the failure of some companies, the EIOPA notes that the European insurance market is robust and the majority of companies are prepared to handle future events without fail. The EIOPA is currently compiling the results of a similar test done of the 91 largest banking groups in the EU.