With the implementation of the Solvency II regime in January 2016 substantial improvements as regards the risks' quantification and the reporting standards were introduced. The enhanced data of all (re)insurance undertakings subject to the Solvency II regime is the basis of the newly developed and improved analytical risk dashboard.
Risk dashboard January 2020 (Q3-2019 Solvency II data)
Risk exposures for the European insurance sector are overall stable. Macro and market risks continue at a high level. Despite the recent easing of monetary policy by major central banks, the macroeconomic environment remains subdued and the prolonged low interest rates challenge the insurance sector.
Market risks, while remaining at a high level, show a decreasing trend due to lower implied bond market volatility since October. Credit Default Swaps (CDS) spreads declined slightly across most bond segments, except sovereign bonds, with credit risks remaining at medium level. Solvency ratios for groups and life undertakings declined across the whole distribution in Q3-2019, but profitability and solvency risks still continue at medium level. Interlinkages and imbalances show an increasing trend due to higher Solvency II values reported mainly for the largest derivative exposure – interest rate swaps. This could possibly be related to Asset and Liability Management (ALM) strategies in response to low interest rates. Market perceptions remain at medium level, with life insurance stock prices outperforming the overall market and non-life stocks underperforming.
This Risk Dashboard based on Solvency II data summarises the main risks and vulnerabilities in the European Union insurance sector through a set of risk indicators of the third quarter of 2019. This data is based on financial stability and prudential reporting collected from 96 insurance groups and 2843 solo insurance undertakings.
- Reference date for company data is Q3-2019 for quarterly indicators and 2018-YE for annual indicators. The cut-off date for most market indicators is beginning of January 2020.
- Risk Levels are based on a 4-level scale from Low (green) to Very high (red). Risk trend reports the quarter on quarter variation of the risk based on a 5-level scale from Substantial Decrease to Large Increase.