During the last months, the Covid-19 outbreak further proved the importance of the Solvency II regulatory framework. The market-consistent and risk based approach helped insurers to better align capital to risk, build-up resilience and enhance the risk management practices, while the adjustments included for long-term guarantees allowed to partially mitigate market volatility caused by COVID-19.
As of year-end 2019 the insurance sector had a solid and comfortable capital buffer (median SCR ratio of 213%) which helped insurers to withstand the initial severe market shocks experienced with the Covid-19 crisis. However, a high level of uncertainty on the magnitude of economic disruption increases downside risks going forward. The COVID-19 has further intensified the preexisiting challenges posed by the prolonged low yield environment, a fundamental risk for both insurance and pension sectors.