The European Insurance and Occupational Pensions Authority launched its first stress test for defined benefit and defined contribution retirement plans in Europe.
The stress test — which the supervisory authority said in a statement on its website was “a quantitative assessment of further work on solvency” of Institutions for Occupational Retirement Provision — will assess the resilience of these retirement plans to adverse market scenarios.
Tests will cover 17 European countries with material IORP sectors, covering at least 50% of their national market, said the statement.
EIOPA said the stress test will provide insight and raise awareness of the corporate retirement sector’s risks and vulnerabilities. It also will allow EIOPA to evaluate any potential unintended effects of IORPs to the rest of the financial sector and the real economy.
The stress test exercises run through Aug. 10.
“Pension funds are already experiencing a challenging environment with low interest rates and rising life expectancy,” said Gabriel Bernardino, chair of EIOPA, in the statement. “A key vulnerability for the occupational pensions sector is a prolonged period of low interest rates combined with a fall in asset prices due to a reappraisal of risk on financial markets. The stress test will retrieve valuable information on the sensitivity of IORPs, sponsoring undertakings and members and beneficiaries to such a scenario. ”
Further information, and specifications of the stress tests, are available on EIOPA’s website.