The European Insurance and Occupational Pensions Authority (EIOPA) published today its Risk Dashboard based on Q4 2022 Solvency II data. The analysis shows that insurers’ exposures to macro and market risks are currently the main concern for the insurance sector, while all other risk categories are at medium levels.
Risks related to the macroeconomic environment continue to be the most relevant for the insurance sector. While forecasts for global GDP growth have ticked up slightly and unemployment remains low, projected consumer prices are in the higher range of previous assessments. Fiscal balances have deteriorated. The credit-to-GDP gap slightly increased and central banks keep tightening monetary policy.
Market risks are high amid increased volatility in the bond and equity markets. Insurers’ relative exposure to bonds, equity and property nevertheless remains largely unchanged.
Liquidity and funding risks increased. Insurers’ cash and liquid asset holdings dropped in the last quarter of 2022 while lapse rates have gone up.
Profitability and solvency risks remain at medium level. Life insurers reported an increase in their SCR ratio, while the same measure for non-life insurers experienced a slight decrease. Return on both assets and premiums rose.
Interlinkage and imbalance risks are also at medium level. Insurers continued realizing market-to-market losses on their interest rate hedging derivatives positions although to a lower extent than in the previous quarter. The sector’s exposure to banks and other financial institutions has increased.
Background
This 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 fourth quarter of 2022. The data is based on financial stability and prudential reporting collected from 97 insurance groups and 2181 solo insurance undertakings.