EIOPA Insurance Risk Dashboard shows overall stable risk assessment with market risks remaining a top concern

The European Insurance and Occupational Pensions Authority (EIOPA) published today its October 2024 Insurance Risk Dashboard, which shows that risks in the European insurance sector are stable and overall at medium levels, with pockets of vulnerabilities stemming from market volatility and real estate prices.

Market risks remain elevated due to high market volatility and persisting vulnerabilities in the real estate market of the euro area. The latest data on real estate prices shows a continued decline, although at a slower pace than in previous quarters.

All other risk categories remain at a medium level.

With regard to macro risks, forecasted GDP growth has held steady, inflation forecasts have slightly eased and fiscal balances at end-September 2024 even showed an improvement compared to the previous quarter. On credit risks, credit default swaps (CDS) spreads for government and corporate bonds are broadly unchanged, except for the spreads for financial unsecured corporate bonds, which have narrowed.

Within liquidity and funding risks, funding conditions in the catastrophe bond market improved compared to the previous quarter, while other liquidity indicators remained largely unchanged.

Concerning solvency and profitability risks, solvency ratios for insurance groups and life solo undertakings fell slightly in the second quarter of the year while remaining largely unchanged for non-life undertakings. Recent data on return on assets, return to premiums and return on excess assets over liabilities point to a stable profitability outlook for insurers.

Market perceptions of the insurance sector remain stable, yet show an upward trend as valuation multiples increased for some groups. During this period, life and non-life insurance stocks have outpaced the market. 

ESG-related risks and digitalisation and cyber risks show a worsening risk outlook for the next 12 months based on the assessment of national supervisors.

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Background

This Insurance Risk Dashboard, based on Solvency II data, summarises the main risks and vulnerabilities in the European insurance sector through a set of risk indicators from the second quarter of 2024 and end-2023. The data is based on financial stability and prudential reporting collected from 95 insurance groups and 2141 solo insurance undertakings. The Solvency II information is complemented with market data with cut-off date end September 2024.