24 November 2022

EIOPA consults on cyber component in its insurance stress testing framework

This discussion paper contains a set of theoretical and practical approaches to support the design phase of potential future insurance stress tests with a focus on cyber risk. This should further enrich the bottom-up stress test toolbox with additional elements to be potentially applied in future exercises.

The European Insurance and Occupational Pensions Authority (EIOPA) published today a Discussion Paper on Methodological Principles of Insurance Stress Testing with focus on Cyber Risk.

EIOPA aims at laying the groundwork for an assessment of insurers’ financial resilience under severe but plausible cyber incident scenarios. The paper elaborates on two main aspects:

• cyber resilience, understood as the capability of an insurance undertaking to sustain the financial impact of an adverse cyber event;
• cyber underwriting risk, understood as the capability of an insurance undertaking to sustain – from a capital and solvency perspective – the financial impact of an extreme but plausible adverse cyber scenario affecting underwritten business.

EIOPA invites stakeholders to share their feedback using the provided template no later than 28 February 2023. Contributions should be sent to the following email address: eiopa.stress.test@eiopa.europa.eu.

The feedback received will be considered in the preparation of a final methodological paper to be published on EIOPA's website.

Background

This discussion paper is part of a broader effort to enhance EIOPA’s stress testing framework. In 2019, EIOPA initiated the enhancement of its methodology for bottom-up stress testing with its first paper on Methodological Principles of Insurance Stress Testing. This was followed by work on specific stress testing related topics such as the assessment of liquidity positions under adverse scenarios and of vulnerabilities towards climate-related risks, leading to the publication of the second paper on Methodological Principles of Insurance Stress Testing with a focus on Liquidity and the third paper on Methodological Principles of Insurance Stress Testing with a focus on Climate Risks.

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