The European Insurance and Occupational Pensions Authority (EIOPA) published today a methodological framework for stress-testing IORPs (Institutions for Occupational Retirement Provision) which presents a set of standard approaches, practical rules and possible methodologies to support the design phase and the management of future IORP stress test exercises.
The rules and guidance provided shall help to make the planning and administration of IORP stress test exercises more efficient, while providing for sufficient room to tailor the analytical tools to the specific objectives of the exercise at hand.
The methodological framework serves as a reference point and toolbox from which appropriate approaches can be developed and custom-fitted, bearing in mind the specificities of the individual exercise in question.
In particular, the methodological framework for stress-testing IORPs sets out:
- Horizontal approaches and types of analysis that can be applied to all types of IORPs and schemes within the divergent European occupational pension frameworks;
- A toolbox approach to choose the most relevant set of analyses to be employed and further adjusted to the objective of the individual exercise in a proportionate manner;
- Approaches to address new and emerging risks, particularly environmental risks.
The stress-testing of financial institutions has evolved considerably over the last few years and has become a core tool for supervisors to identify and assess risks and vulnerabilities in the financial system. EIOPA is mandated to conduct regular EU-wide stress test exercises for the European IORP sector, in collaboration with the European Systemic Risk Board.