Stress tests to insurance companies will be commencing normally this year also, in spite the transition period that was given to the companies in order to recover from their great losses over PSI+. These tests will determine the limits of the insurance market against plausible negative developments in capital markets, but also to disastrous or adverse insurance events.

Sources from NBG (National Bank of Greece) note that these stress tests to insurance companies will be held in the second half of this fiscal year with reporting date the 31st of December 2011. The data collected will be sent to EIOPA (European Insurance and Occupational Pensions Authority).

The market awaits with interest the scenarios (baseline and extreme) that will be included for this year's stress tests on the bonds. This is because after completing the cut (53.5%) and the exchange of new bonds great losses have been recorded, while the current political uncertainty leads values and new bonds to the bottom.

As a result of the high and hardly manageable losses, the Bank of Greece decided for this year to valuate new bonds at regulatory capital at a price which equals 64.5% of the nominal value of existing securities, rather than at current prices. In this way provides a transition period of several months in order to strengthen insurance capital.

Last year, insurance companies were valuating Greek Bonds at regulatory capitals with prices that corresponded 83%-84% of their nominal value this event created a difference that has to be covered.

Source: www.nextdeal.gr