Occupational pensions stress test - EIOPA

On 26 January 2016, the European Insurance and Occupational Pensions Authority (“EIOPA”) published the results of the stress test exercise which was conducted in August 2015 across 17 European countries to examine the sensitivity of the occupational pensions sector to adverse market developments.

EIOPAHeterogeneity is very high in the defined benefit sector among different countries and therefore it is necessary to use a harmonised approach in order to assess these financial shocks.

Although it is noted that this was not a pass or fail exercise, the results of the stress tests showed significant increase in deficits and revealed risks and vulnerabilities which, for some countries, are substantial given the relative size of the pensions sectors to the countries’ economies. However, it was noted that the impact can be mitigated as the long-term nature of liabilities allows pension funds to use longer recovery plan periods and other security mechanisms.

The official results published by EIOPA in their Stress Test Report can be accessed here and the official press release can be found here.