ACPR climate stress test for insurers (2023-2024)
The French supervisor's second climate exercise, limited to insurers, which added to the long-term view a short-term shock combining a run of disasters with a market crash.
The ACPR's first exercise, in 2020, projected pathways out to 2050: useful for strategy, but too distant to speak to a prudential balance sheet managed over one to three years. The second exercise, limited to insurance undertakings, adds an adverse short-term scenario: a run of droughts and floods followed by a dam failure in the Provence-Alpes-Côte d'Azur region, combined with an abrupt repricing of financial markets. Each undertaking projects the effect on its assets, liabilities and solvency ratio, using assumptions set by the supervisor (a bottom-up method). Calculations assume a static balance sheet, with no management action, which makes the result a theoretical floor rather than a forecast. Participation is voluntary and carries no capital requirement.
Launched on July 6, 2023, the exercise brought together fifteen insurance groups (twenty-two entities, about 90% of the French market's total balance sheet). According to the report published in May 2024, the short-term scenario would take the SCR coverage ratio from 230% at end-2022 to 170% at end-2027, a 60-point drop driven mostly by the financial shocks.
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