Do EU-wide stress tests affect insurers' dividend policies?

The thematic article employs panel data to investigate whether stress test results and other characteristics associated with European insurers vulnerabilities affect dividend distributions and share buybacks. The authors, Petr Jakubik from EIOPA and Saida Teleu from the Central Bank of Malta, focus on the EU wide insurance stress test conducted in 2018 and 2021 to also capture a behaviour of insurers during the COVID-19 crisis. Empirical results suggest that the two stress tests considered had no significant impact on changes in dividend distributions. However, more resilient insurers measured by assets-over-liabilities ratio seem to have higher dividend payout ratios including share buybacks. On the contrary, higher generated profit tend to be reflected in lower payout ratio.