The European Insurance and Occupational Pensions Authority (EIOPA) published today its July 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.
Macro risks are at a medium level, with forecasted GDP growth for major geographical areas showing positive developments and forecasted inflation slightly declining. Credit risks are also at a medium level, with overall high credit quality of insurers’ investments and credit default swaps (CDS) spreads for financial unsecured and non-financial corporate bonds slightly increasing.
Market risks remain at a high level due to market volatility and persisting real estate market vulnerabilities in the Euro Area. Latest available annual data shows that the spread of investment returns over guaranteed interest rates for life insurance undertakings turned positive in 2023, driven by positive market returns.
Liquidity and funding risks are at a medium level with overall stable liquidity positions across the insurance sector. Funding conditions in the catastrophe bond market have slightly deteriorated in the first quarter of 2024, with lower volumes issued at a higher spread compared to the previous quarter. Solvency and profitability risks are also unchanged at medium level. Solvency ratios declined slightly in the first quarter of the year, while the latest available data points to an improvement in the non-life combined ratio and in the return on investments for life insurance undertakings.
Market perceptions of the insurance sector remain stable at medium level. Insurers’ CDS spreads increased in June, but there was also an improvement in the external rating outlook for some insurance groups.
All remaining risk categories are at medium level, with ESG related risks and Digitalisation and cyber risks showing a worsening risk outlook for the next 12 months based on the assessment of national supervisors.
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 first quarter of 2024 and end-2023. The data is based on financial stability and prudential reporting collected from 93 insurance groups and 2153 solo insurance undertakings. The Solvency II information is complemented with market data with cut-off date end-June 2024.