Macro, markets and digitalisation risks are insurers’ top concern according to EIOPA’s Insurance Risk Dashboard

The European Insurance and Occupational Pensions Authority (EIOPA) published today its November 2023 Insurance Risk Dashboard, which shows that insurers’ exposures to macro, market and digitalisation risks are currently at a high level and the main concern for the sector. Risk levels for the remaining risk categories are constant at medium levels.

Macro risks remain among the most relevant for the insurance sector as global GPD growth forecasts for the next four quarters deteriorated and the credit-to-GDP gap turned more negative according to September data. Credit risks continue at a medium level without major changes, while market risks remain prominent given elevated volatility in bond markets and increased volatility in equity markets.

Liquidity and funding risks remain stable, with the median liquid assets ratio slightly improving in the second quarter of 2023. Bond issuance and catastrophe bond issuance increased. Profitability and solvency risks moderated slightly as key performance indicators such as the return on assets, return to premiums and return on the excess of assets over liabilities all showed improvements in the first half of 2023. The distribution of the solvency capital requirement (SCR) ratio improved in the second quarter especially for life undertakings and groups.

Interlinkages and imbalances risks as well as insurance risks are also stable at medium levels, with the latter now showing a positive median year-on-year premium growth in the second quarter of this year for life business, following negative readings in the previous quarters.

ESG related risks remain stable at medium level, as insurers’ median ESG rating score remains unchanged around A-. The median exposure towards climate relevant assets hovers around 3.3% of total assets, while insurers’ investments in green bonds over total green bonds outstanding are at 7%. As for physical risks, the exposure to flood risks slightly increased while exposure to windstorm risk slightly decreased between 2021 and 2022.

Digitalization and cyber risks increased to a high level and are expected to further increase according to the assessment of supervisors. The frequency of cyber incidents impacting all sectors of activity, as measured by publicly available data, increased in the second quarter of 2023 compared to the same quarter of last year. Cyber negative sentiment also indicates an increasing concern in the third quarter of 2023.

Go to the Insurance Risk Dashboard

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 second quarter of 2023 and end-2022. The data is based on financial stability and prudential reporting collected from 96 insurance groups and 2175 solo insurance undertakings. The Solvency II information is complemented with market data with cut-off date end-September 2023.

Disclaimer: The November 2023 Risk Dashboard was updated on November 24, 2023 to address data quality issues in two graphs under the ESG risk section concerning insurers' investments in green bonds. These revisions do not impact the risk level or trend of the ESG-related risk category.