EIOPA Insurance Risk Dashboard sees market risks as key concern for insurers in early 2024

The European Insurance and Occupational Pensions Authority (EIOPA) published today its February 2024 Insurance Risk Dashboard, which shows that insurers’ exposure to market risk is currently at a high level and the main concern for the sector. Macro and digitalisation risks are still relevant but have decreased to medium levels. Risk levels for the remaining risk categories are at medium levels.

Market risks remain prominent given the elevated volatility in bond markets and a further decrease in commercial real estate prices. While macro risks persist in the insurance sector, there is a declining trend, primarily due to a reduction in forecasted inflation. Credit risks remain at a medium level with no indication of significant changes.  

Liquidity and funding risks remain at medium levels with an increasing trend driven in part by low catastrophe bond issuance in Q3-2023. The median of the distribution of insurers’ cash holdings has slightly decreased compared to the previous quarter. Profitability and solvency risks are at medium levels: the median SCR ratio for non-life undertakings showed an increase compared to the previous quarter, while the distribution for life undertakings remained largely unchanged.

Interlinkages and imbalances risks as well as insurance risks are also stable at medium levels.

ESG risks remain at a medium level. Insurers’ median exposure towards climate-relevant assets hovers around 3.3% of total assets, while their investments in green bonds are steady at around 7% of total green bonds outstanding.

Digitalization and cyber risks decreased to medium level, but forward-looking assessments point to an increase in this risk category over the next 12 months. Cyber negative sentiment also indicates an increasing concern in the fourth quarter of 2023.

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Background

This Insurance Risk Dashboard, based on Solvency II data, summarises the main risks and vulnerabilities in the European Union’s insurance sector through a set of risk indicators of the third quarter of 2023 and end-2022. The data is based on financial stability and prudential reporting collected from 92 insurance groups and 2175 solo insurance undertakings. The Solvency II information is complemented with market data with cut-off date end-December 2023.