As in 2013, all life and health insurance undertakings produced positive results. The vast majority of property and casualty insurers and Pensionskassen also passed all four scenarios.

Scenarios

German insurers were required to submit the results of the stress test by the end of March 2014. The scenarios used were rules-based and were calculated on undertakings’ positions relative to the EuroStoxx 50 as of 31 December 2013 (index: 3,109):

• Bonds-only scenario: a 10% fall in the price of fixed-income securities
• Equities-only scenario: a 22% fall in share prices
• Mixed bonds/equities scenario: a 15% fall in share prices and a 5% drop in the price of fixed-income securities
• Mixed property/equities scenario: a 15% fall in share prices and a 10% drop in the market value of properties

Life and health insurers

88 life insurance undertakings submitted a stress test. BaFin had exempted two undertakings from the obligation to submit a stress test because of the low-risk nature of their investments. All 88 life insurance undertakings reported positive results in all four stress test scenarios without company-specific characteristics having to be taken into account.

BaFin included 42 health insurers in the analysis, while seven undertakings were not required to take part in the stress test owing to the low-risk nature of their investments. All 42 health insurance undertakings passed the stress test under all four scenarios.

Property and casualty insurers

BaFin had required 181 property and casualty insurers to submit their stress test results. A total of 34 undertakings were exempted from the obligation to submit a stress test. 174 property and casualty insurers (96.1%) presented positive stress test results.

Seven property and casualty insurers failed to pass the stress test in one or more scenarios. In six cases this was due to the higher extrapolation of the target values of the dynamic parameters required by the stress test model in conjunction with company-specific one-off effects which led to changes in net premium income or net claims provisions. In cooperation with the undertakings concerned, BaFin has been or is currently working on measures to improve their risk-bearing capacity.

In one case the result of the stress test was negative because the insurer’s required solvency margin was below the minimum guarantee fund. Here, BaFin has already taken supervisory measures and discussed them with the insurance undertaking.

Pensionskassen

Of the 146 Pensionskassen supervised by BaFin, 18 had been exempted from the obligation to submit a stress test. As three of these undertakings had decided to perform a test on a voluntary basis, BaFin evaluated 131 stress tests in total. 120 Pensionskassen reported positive results in all four scenarios. Three Pensionskassen failed in all scenarios. One undertaking produced negative results in three scenarios and three in two scenarios, while four Pensionskassen each failed in one scenario.

All eleven Pensionskassen that reported negative results are relatively small and not among the 20 largest undertakings in the pension scheme industry. Of the eleven Pensionskassen that reported negative results one has been closed to new members for many years and another reduced its benefits in 2013, while a third is planning a portfolio transfer in 2014. The shortfalls from the regulatory minimum requirement are generally very slight.

In consultation with BaFin, the remaining eight Pensionskassen have either already taken measures to improve their risk-bearing capacity or to comply with the solvency requirements, or will do so in 2014. In order to be able to monitor developments closely, BaFin will require these Pensionskassen to submit quarterly stress tests.

2014 stress test results*

	Number of stress tests submitted	Negative results
Life insurers	88	0
Health insurers	42	0
Property and casualty insurers	181	7 (3,9 Prozent)
Pensionskassen	131	11 (8,4 Prozent)
*Balance sheet cut-off date: 31. December 2013

Stress tests as early warning system

Stress tests are one of several early warning systems that BaFin can use in carrying out its duties. They simulate developments on the capital market that are possible but not certain. If an undertaking does not pass a stress test scenario taking into account its valuation reserves and hedging strategies, this does not mean that the undertaking is currently no longer in a position to fulfil its obligations towards its policyholders. A negative stress test result merely indicates a reduced risk-bearing capacity, which should be remedied promptly. Concrete actions in this regard could include raising additional capital, switching investments, hedging investments on the capital markets and cutting bonuses.