Quarterly risk assessment of the occupational pensions sector
The IORP risk dashboard, based on individual occupational pensions regulatory reporting, summarises the main risks and vulnerabilities in the IORPs sector of the European Economic Area (EEA) for defined contributions (DC) and defined benefits (DB) pension schemes.
It includes a set of risk indicators covering risk categories, such as
- market and credit risks,
- liquidity risks,
- reserve & funding risks,
- ESG risks, and
- cyber risks.
May 2024 IORP Risk Dashboard
Key observations:
EIOPA's May 2024 Occupational Pensions Risk Dashboard shows that the exposure of Institutions for occupational retirement provisions (IORPs) to market & asset return risks remains at a high level due to market volatility and real estate market vulnerabilities. Annual indicators such as portfolio return (based on 2022) do not yet capture the positive market performance of 2023.
Macro risks are at a medium level with macroeconomic indicators showing signs of positive developments such as a decline in forecasted inflation and improvements in the GDP growth outlook. Economic growth nevertheless remains relatively weak.
Liquidity risks are at a medium level but show a decreasing trend compared to the previous quarter, driven by developments in derivative positions. The net asset value of IORP's derivative positions, which are typically used to hedge against a drop in interest rates, shifted closer to zero from earlier negative readings due to lower market interest rates in Q4-2023.
Reserve and funding risks remain unchanged at a medium level with a slight deterioration in the financial positions of defined benefit IORPs due to lower interest rates.
All other risk categories are currently assessed at a medium level, with increases expected in the risk level for digitalisation and cyber risks over the next 12 months.