European insurers will be undergoing stress tests this December, in an attempt to help policy makers assess the sector’s potential resilience to shocks and to contribute to the convergence among supervisory practices.

According to the Committee of European Insurance and Occupational Pensions Supervisors – or CEIOPS - three scenarios will be tested. First will be an adverse scenario mirroring the development of capital markets between the end of September 2008 and the end of September 2009. The second scenario will reflect a more severe and prolonged recession and the third scenario will reflect a situation of inflation picking up rapidly leading to a steep rise in interest rates. The stress testing will focus on market and credit risks.

The Financial Times reported that Aviva, Allianz and AXA would be among those involved in the stress tests.