The European Insurance and Occupational Pensions Authority (EIOPA) published today its Risk Dashboard based on Solvency II data from the third quarter of 2022. The results show that insurers’ exposures to macro and market risks are currently the main concern for the insurance sector. All other risk categories, such as profitability and solvency, climate as well as digitalisation and cyber risks stay at medium levels.
Macro risks remain a key source of concern amid a further decrease in global GDP growth expectations and high CPI forecasts for the main geographical areas, even as unemployment remains low. The weighted average of 10-year swap rates increased. Central banks continue the normalisation of their monetary policy.
Market risks are currently at a high level. Volatility in bond and equity markets continue to top last year’s average. Property prices remain at the same level. Insurers’ median exposure to bonds and equity remain relatively unchanged while median exposure to property slightly increased in Q2 2022. Credit risks remain relatively moderate. Credit default swap (CDS) spreads slightly increased for government and secured financial bonds, while slightly decreasing for unsecured financial and non-financial corporate bonds in the last quarter of 2022. Insurers’ relative exposure to non-financial corporate and financial secured bonds slightly decreased in Q3 2022, while exposure to sovereign and financial bonds remained broadly stable.
Profitability and solvency risks are unchanged. Life insurers reported a decrease in their solvency capital requirement (SCR) ratio for the second consecutive quarter, while the SCR ratio of non-life insurers edged up slightly.
Insurance risks remain at medium level with an increasing trend. The year-on-year premium growth for life insurance slowed further and turned negative, whereasthe non-life segment posted a significant increase in line with the increasing trend experiend in the past quarters.
Regarding market perceptions, insurance life and non-life stocks overperformed. The median price-to-earnings ratio of insurance groups is largely unchanged. The median price-to-earnings ratio of insurance groups remained around the same level as at the last assessment. The median of CDS spreads of insurers decreased. Insurers’ external ratings remained broadly stable.
On climate risks, insurers mantained their relative exposure to green bonds, while the ratio of their investments in green bonds over the total green bond outstanding slightly decreased. The growth of green bonds in insurers’ portfolios has decreased, while the growth of green bonds outstanding is stable. The median exposure to climate relevant assets remained around the same levels.
The materiality of digitalisation and cyber risks for insurance as assessed by supervisors is stable. Nevertheless, cyber security issues and concerns of a hybrid geopolitical conflict remain. The cyber negative sentiment indicator remained high, albeit with a downward trend, in the last quarter of 2022 as the frequency of cyber incidents increased compared to the same quarter last year.
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 third quarter of 2022. The data is based on financial stability and prudential reporting collected from 87 insurance groups and 2191 solo insurance undertakings.
- Publication date
- 7 February 2023