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

Author

Listed:
  • Petr Jakubik

    (Charles University in Prague)

  • Saida Teleu

    (Charles University in Prague
    Central Bank of Barbados
    Anglo-American University)

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.

Suggested Citation

  • Petr Jakubik & Saida Teleu, 2024. "Do insurance stress tests matter? Evidence from the EU-wide insurance stress tests," Risk Management, Palgrave Macmillan, vol. 26(3), pages 1-27, September.
    • Handle: RePEc:pal:risman:v:26:y:2024:i:3:d:10.1057_s41283-024-00147-3
    DOI: 10.1057/s41283-024-00147-3
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    More about this item

    Keywords

    European insurance sector; EU-wide insurance stress test; Systemic risk; Event study; Equity prices;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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